Deciphering The Hindu Growth Epic

No 10-19, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: India’s investment rate has increased fourfold since 1950 and is now nearly 40% of GDP. Many studies have suggested that this rising investment rate is the most significant component of India’s growth acceleration. I assess these hypotheses using the neoclassical growth model decomposition method. Unlike other methods based on this model, such as Hall and Jones (QJE 1999), the method used in this paper does not rely on the assumption of steady state. I find that the rise in investment rates since the 1970s explains only 30% of India’s growth over that period. I conclude that, notwithstanding the high investment rates, the main source of India’s growth acceleration is the modest upward trend in productivity growth since the 1970s.

Keywords: Economic Growth; India; Growth Accounting; Investment; Productivity (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010
New Economics Papers: this item is included in nep-dge
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Journal Article: Deciphering the Hindu growth epic (2012)
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