Sources of India's economic growth: trends in total factor productivity

Indian Economy, Total Factor Productivity, and Economic Growth

Domestic Market Integration

The paper looks into the level of integration of commodity markets in India, across centres and states using consumer price data. It measures the extent to which domestic markets for goods in India are integrated, and recommends policy options to facilitate integration. The paper addresses questions: Are domestic markets for goods integrated across states? Has market integration increased over time? What are the policy options to facilitate integration? The paper tests the methodology proposed by Bradford and Lawrence (2004) on the consumer prices of goods in major states across India. This is then repeated using consumer price data at two points in time (1994 and 2004), allowing an assessment of whether Indian markets have integrated over time. Market integration is also tested for individual commodities across markets. The annual consumer prices for commodities were compiled from the Labour Bureau series of average monthly consumer prices of commodities for Industrial workers across 70 constituent centres in 18 states and monthly data was compiled from the Indian Labour Journal, a monthly publication from Labour Bureau, Ministry of Labour Government of India. Authors are thankful to Labour Bureau, Shimla for providing data on consumer prices at the disaggregated level. This study was commissioned by The World Bank as the background paper on market integration in The World Bank Development Policy Review: Inclusive Growth and Service Delivery: Building on India's Success. July 2006Market Integration, Consumer Prices, Primary Food, Manufactured Goods, India

Domestic Market Integration

The paper looks into the level of integration of commodity markets in India, across centres and states using consumer price data. It measures the extent to which domestic markets for goods in India are integrated, and recommends policy options to facilitate integration. The paper addresses questions : Are domestic markets for goods integrated across states? Has market integration increased over time? What are the policy options to facilitate integration? The paper tests the methodology proposed by Bradford and Lawrence (2004) on the consumer prices of goods in major states across India. This is then repeated using consumer price data at two points in time (1994 and 2004), allowing an assessment of whether Indian markets have integrated over time. Market integration is also tested for individual commodities across markets. The annual consumer prices for commodities were compiled from the Labour Bureau series of average monthly consumer prices of commodities for Industrial workers across 70 constituent centres in 18 states and monthly data was compiled from the Indian Labour Journal, a monthly publication from Labour Bureau, Ministry of Labour Government of India. Authors are thankful to Labour Bureau, Shimla for providing data on consumer prices at the disaggregated level.Market Integration, Consumer Prices, Primary Food, Manufactured Goods, India

Poverty and Hunger in India: What is Needed to Eliminate Them

There is a widespread impression among the Indian intelligentsia, foreign scholars, and residents of developed/rich countries that India’s economic growth has not reduced poverty, that globalisation has worsened poverty and/or income distribution, and that there are hundreds of millions of hungry people in India. These arguments are buttressed by recourse to India’s ranking on several social indicators. Esoteric debates about the comparability of survey data and gaps between NSS and NAS add to the confusion and allow ideologues to believe and assert whatever information suits the argument. What are the basic facts about poverty, income distributions, and hunger at an aggregate level? This paper reviews the available data and debates on this subject and comes to a commonsense view. It then tries to link some of the outcomes to the policy framework and programmes of the government. The paper finds that India’s poverty ratio of around 22 percent in 1999-2000 is in line with that observed in countries at similar levels of per capita income. The ratio is relatively high because India is a relatively poor/ low-income country, i.e., with low average income. 90 percent of the countries in the world have a higher per capita (average) income than India. The number of the poor is very high because India’s population is very large, the secondhighest in the world. India’s income distribution as measured by the Gini co-efficient is better than three-fourths of the countries of the world. The consumption share of the poorest 10 percent of the population is the sixth best in the world. Where India has failed as a nation is in improving its basic social indicators like literacy and mortality rates. Much of the failure is a legacy of the three decades of Indian socialism (till 1979-80). The rate of improvement of most indicators has accelerated during the market period (starting in 1980-81). The gap between its level and that of global benchmarks is still wide and its global ranking on most of these social parameters remains very poor. This is the result of government failure. The improvement in social indicators has not kept pace with economic growth and poverty decline, and this has led to increasing interstate disparities in growth and poverty. JEL classification: I3, I32, I38 Keywords: Hunger, Poverty, Public Goods, Public and Quasi-Public Goods and Services, Basic Education, Public Health, Sanitatio

China’s Socialist Market Economy - Lessons Of Success

Through the 1990s China was widely and often held up as a paragon of economic policy reform driven growth and an example for others to follow. We in India were not immune to the temptation to do the same. There is no doubt that China has lessons that India and many other countries can learn, lessons that will help improve their growth rate. Some of these lessons have been correctly learned, for instance those related to the export led growth model adopted by many S. E. Asian and E Asian countries. There is however a great danger of learning wrong lessons, This danger arises from the fact that information can and is controlled much more easily in a communist party ruled State than it is in a democracy, even a flawed one. China has also gone out of the way to make economic interaction with it (e.g. FDI, outsourcing of manufacturing) profitable for foreigners (non-Chinese), so their interests are best served by publicising information that ensures that profitable interaction with the Chinese Communist Party (CCP) and the State continue. The present paper is an attempt to derive a more balanced picture of Chinas past success so that better and more fruitful lessons can be drawn for the use of other noncommunist countries. In this context the economic history of India, characterised as it is by 30 years of Indian Socialism can be quite beneficial as it comes closest to the market based Socialism with Chinese Characteristics. In contrast comparisons of China with Soviet socialism (USSR) can be very misleading and those with Cuba or North Korea are deliberate red herrings. With the exception of the degree of external openness (FDI & foreign trade), Chinas economy in 2005 is still much more socialist than Indias was in the heyday of the Indian Version of socialism.China, Market Economy, Economic Transition, Socialist Market Economy

Economic reforms: Policy and institutions some lessons from Indian reforms

Economic policy and policy reform over the last few decades has been motivated by the need to accelerate growth or equivalently to reverse a decline in growth rate. The economic literature on the determinants of growth has burgeoned and disagreement has followed consensus on the policy prescriptions that need to befollowed to achieve this purpose. Sometimes the disagreement is exaggerated by the titans of the profession, so as to distinguish themselves from those constituting the conventional wisdom. The present paper moves the focus from this "macro"debate to concrete issues of policy formulation and policy change and explores the links between policy and institutions in the context of economic reforms. Thus successful introduction of new policies may require new institutions and the degree of success in changing policies may depend on the degree to which existing institutions are modified. The literature on Institutions and Development has dealt with questions of grand design such as the Constitution, the rule of law (personal safety), property rights and informal rules embodied in culture. These are matters that happen on a timescale of a quarter/half century or more and can be thought of as the "superstructure" of institutions. The quantitative work on institutions and growth has explored the linkage between these institutional issues and economic growth. In the current paper we focus on what may be called the "microstructure" of institutions, a smaller scale at which change can occur over a time frame of decades (or half decades). Among the issues that a rise in this context are how changing institutions requirechanges in policies.Economic Reforms, India, Policy, Institutions

India’s economy: shooting star or sprinter?

Speaking at LSE, Dr Arvind Virmani argued that India has the capacity to resume high levels of economic growth, but only if the government implements policies to remove bottlenecks and address supply constraints