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eep2011_lecture_paradigm shift - reforms Indiasgrowthstory...

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Click to edit Master subtitle style  3/4/11 Paradigm shifts and Economic  reforms
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Click to edit Master subtitle style  3/4/11 India’s growth story:  Background  India has been growing at an average annual rate more  than 6% since the late ‘80s. In the early phase of last decade (2003-04 to 2006-07)  its growth rate touched 8.6%. This was comparable to Korea and Taiwan in their  peak! There has been question regarding overheating of the  Indian economy, but major slowdown in the growth rate 
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 3/4/11 Background  India’s development program was first launched in  1951-52:  Five year plan. During 1951-52 to 1987-88, the economy grew  merely   at a rate of 3.8%. Other economies like Korea took off in a major way in  this period: grew at a rate of more than 8%.
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 3/4/11 India’s exclusive growth  experience Three features distinguish India’s growth experience  from others: 1. Its growth trajectory is unique among developing  nations: it has not grown at super-high rates of 8%-  10% p.a. on a sustained basis (e.g. East Asia) and it  has also not suffered prolonged stagnation (e.g. Latin  America). When there has been crisis, it has been  short-lived. 2. India has always pursued near-autarkic trade policies  with substantial interventionist policies. But 
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 3/4/11       Finally, India is a developing nation with effective  democracy since the 1940s. Other countries like  Korea, Taiwan, Singapore, Hong Kong and China have  attained high rates of growth under authoritarian  regimes.
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 3/4/11 Distinguishing Phases We have data of around 60 years of Indian growth  experience. The first important issue is how to divide  this into limited number of phases for an orderly  discussion of the growth experience. Criterion for choosing could be: (i) Five-year plans; (ii)  Policy shift; (iii) Sharpness of differences in the growth  rates. India’s growth rates over years have fluctuated wildly.  Therefore choice of the cut-off years has an important 
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 3/4/11 Panagariya (2007) draws cut-off lines primarily on the  basis of sharpness of differences in the growth rates.
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