Working Paper: NBER ID: w12901
Authors: Barry Bosworth; Susan M. Collins; Arvind Virmani
Abstract: This paper empirically examines India's economic growth experience during 1960-2004, focusing on the post 1973 acceleration. Careful attention is paid to data quality. The analysis focuses on two unusual dimensions of India's experience -- the concentration of growth in services production, and the modest levels of human and physical capital accumulation. A growth accounting analysis disaggregates by major sector, and highlights implications for aggregate productivity growth of the reallocation of resources out of agriculture to more productive activities in industry and services. But concerns are raised that growth in services may be overstated. India will need to broaden its current expansion to provide manufactured goods for the world market and jobs for its large pool of low-skilled workers. Increased public saving, as well as a rise in foreign saving -- particularly FDI -- could augment the rising household saving and support the increased investment necessary to sustain rapid growth.
Keywords: Economic Growth; India; Service Sector; Manufacturing; Human Capital
JEL Codes: F43; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| resource reallocation (Q20) | aggregate productivity growth (O49) |
| increased public saving and FDI (F21) | rising household savings (D14) |
| rising household savings (D14) | necessary investment (G31) |
| necessary investment (G31) | sustained growth (O44) |
| modest levels of human and physical capital accumulation (O49) | growth potential (O40) |