Working Paper: CEPR ID: DP4371
Authors: Dani Rodrik; Arvind Subramanian
Abstract: Most conventional accounts of India?s recent economic performance associate the pick-up in economic growth with the liberalization of 1991. This Paper demonstrates that the transition to high growth occurred around 1980, a full decade before economic liberalization. We investigate a number of hypotheses about the causes of this growth ? favourable external environment, fiscal stimulus, trade liberalization, internal liberalization, the green revolution, public investment ? and find them wanting. We argue that growth was triggered by an attitudinal shift on the part of the national government towards a pro-business (as opposed to pro-liberalization) approach. We provide some evidence that is consistent with this argument.
Keywords: economic growth; India; liberalization
JEL Codes: O40; O50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Attitudinal shift of the national government towards a pro-business stance (E65) | Economic growth in India (O00) |
| Attitudinal shift of the national government (H10) | Higher growth rates in states aligned with the national government (O10) |
| Attitudinal shift of the national government (H10) | Stimulation of the private sector (O25) |
| Stimulation of the private sector (O25) | Economic growth in India (O00) |
| Attitudinal shift of the national government (H10) | Enhanced profitability of existing businesses (L25) |
| Enhanced profitability of existing businesses (L25) | Economic growth in India (O00) |
| Attitudinal shift of the national government (H10) | Significant economic growth during the 1980s (E65) |