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India Transformed? Insights from the Firm Level 1988-2005

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  • Laura Alfaro
  • Anusha Chari

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 in manufacturing and services industries. Detailed balance sheet and ownership information permit an investigation of a range of variables. We analyze firm characteristics shown by industry before and after liberalization and investigate how industrial concentration, number, and size of firms 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 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15448.

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Date of creation: Oct 2009
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Publication status: published as Alfaro, Laura, and Anusha Chari. "India Transformed: Insights from the Firm Level 1988–2005." India Policy Forum 6 (2009).
Handle: RePEc:nbr:nberwo:15448

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Cited by:
  1. Pete Klenow & Gunjan Sharma & Albert Bollard, 2011. "India's Mysterious Manufacturing Miracle," 2011 Meeting Papers 1176, Society for Economic Dynamics.
  2. 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.
  3. Maria Bas & Antoine Berthou, 2013. "Does Input-Trade Liberalization Affect Firms' Foreign Technology Choice?," Working Papers 2013-11, CEPII research center.
  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. 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.
  6. Maria Bas, 2013. "Does Services Liberalization Affect Manufacturing Firms' Export Performance? Evidence from India," Working Papers 2013-17, CEPII research center.
  7. Maria Bas & Antoine Berthou, 2012. "The Unequal Effects of Financial Development on Firms' Growth in India," Working Papers 2012-22, CEPII research center.
  8. Laura Alfaro & Anusha Chari, 2010. "Does Liberalization Promote Competition?," Working Papers, School of International and Public Affairs, Columbia University 1112, School of International and Public Affairs, Columbia University, revised Oct 2010.
  9. Aradhna Aggarwal & Takahiro Sato, 2011. "Firm Dynamics and Productivity Growth in Indian Manufacturing: Evidence from Plant Level Panel Dataset," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2011-07, Research Institute for Economics & Business Administration, Kobe University.

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