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India Transformed? Insights from the Firm Level 1988-2005

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  • Laura Alfaro

    ()
    (Harvard Business School, Business, Government and the International Economy Unit)

  • Anusha Chari

    ()
    (Department of Economics, University of North Carolina at Chapel Hill)

Abstract

Using firm-level data this paper analyzes, the transformation of India's economic structure following the implementation of economic reforms. The focus of the study is on publicly-listed and unlisted firms from across a wide spectrum of manufacturing and services industries and ownership structures such as state-owned firms, business groups, private and foreign firms. Detailed balance sheet and ownership information permit an investigation of a range of variables such as sales, profitability, and assets. Here we analyze firm characteristics shown by industry before and after liberalization and investigate how industrial concentration, the number, and size of firms of the ownership type evolved between 1988 and 2005. We find great dynamism displayed by foreign and private firms as reflected in the growth in their numbers, assets, sales and profits. Yet, closer scrutiny reveals no dramatic transformation in the wake of liberalization. The story rather is one of an economy still dominated by the incumbents (state-owned firms) and to a lesser extent, traditional private firms (firms incorporated before 1985). Sectors dominated by state-owned and traditional private firms before 1988-1990, with assets, sales and profits representing shares higher than 50%, generally remained so in 2005. The exception to this broad pattern is the growing importance of new and large private firms in the services sector. Rates of return also have remained stable over time and show low dispersion across sectors and across ownership groups within sectors.

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Bibliographic Info

Paper provided by Harvard Business School in its series Harvard Business School Working Papers with number 10-030.

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Length: 55 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:hbs:wpaper:10-030

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Cited by:
  1. Maria Bas, 2013. "Does Services Liberalization Affect Manufacturing Firms' Export Performance? Evidence from India," Working Papers 2013-17, CEPII research center.
  2. Albert Bollard & Peter Klenow & Gunjam Sharma, 2013. "India's Mysterious Manufacturing Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 59-85, January.
  3. Michael Keren, 2009. "China and India - a Note on the Influence of Hierarchy vs. Polyarchy on Economic Growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 325-346, December.
  4. Sharma, Supriya, . "Organizational Transformation in India: Developing a Typology," IIMA Working Papers WP2012-11-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
  5. Maria Bas & Antoine Berthou, 2013. "Does Input-Trade Liberalization Affect Firms' Foreign Technology Choice?," Working Papers 2013-11, CEPII research center.
  6. Aradhna Aggarwal & Takahiro Sato, 2011. "Firm Dynamics and Productivity Growth in Indian Manufacturing: Evidence from Plant Level Panel Dataset," Discussion Paper Series DP2011-07, Research Institute for Economics & Business Administration, Kobe University.
  7. Laura Alfaro & Anusha Chari, 2010. "Does Liberalization Promote Competition?," Working Papers 1112, School of International and Public Affairs, Columbia University, revised Oct 2010.
  8. Maria Bas & Antoine Berthou, 2012. "The Unequal Effects of Financial Development on Firms' Growth in India," Working Papers 2012-22, CEPII research center.
  9. Michael Walton & Anusha Nath & Ashoka Mody, 2011. "Sources of Corporate Profits in India:Business Dynamism or Advantages of Entrenchment?," IMF Working Papers 11/8, International Monetary Fund.

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