Boom and Bust? A Political Economy Reading of India's Growth Experience,1993-2013

We examine the political economy causes of India's growth acceleration in the early 1990s, and the periods of high growth in the 1990s and early 2000s, and the subsequent slowdown since 2011. We argue that India's post-reform growth experience can be separated into three distinct growth episodes. The first growth episode was from 1993 to 2002 and was characterised by a set of predictable informal relationships (which we call 'ordered deals') between political and economic elites, which were relatively open as well. The second episode was from 2002 to 2010, and deals in this period became increasingly closed, leading to negative feedback effects from accountability institutions, the middle class and non-elites, along with structural retrogression of the economy. The third episode, beginning in 2011, was one of an incipient growth deceleration, and was characterised by increasingly disordered deals. We argue that this is the outcome of two separate phenomena: (1) increasing political de-legitimation of the growth process that was seen as highly predatory and corruptionintensive; and (2) the pushback from accountability institutions in the post-2010 period, leading to greater uncertainty in the deals environment in 2011–2014. For growth to return, we argue that more than economic reforms or infrastructure spending, it is necessary for a realignment of the relationships between political and economic elites and between elites and non-elites such that there is a return to 'open ordered deals' that are politically legitimate and provide an enabling environment for structural transformation.