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Investment Led Growth In India: Hindu Fact or Mythology?

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  • Peter E. Robertson

    (UWA Business School, The University of Western Australia)

Abstract

India’s investment rate has increased fourfold since 1950 and has risen sharply this decade to 36% of GDP. But contradictory views have been expressed regarding the importance of this investment pattern for India’s economic growth. This paper evaluates the impact of the rise in India’s investment rate on its economic growth, using the neoclassical growth model. It finds that, although rises in the investment rate and capital accumulation have been strong, the increases in the investment rate have added no more than 1.2 percentage points, and perhaps as little as 0.7 percentage points, to India’s overall growth rate of GDP per worker of 2.7%. It also shows that the current investment boom will have a very small effect on future growth rates and that the benefits from further increases in the investment rate are also likely to be small.

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File URL: http://www.business.uwa.edu.au/__data/assets/pdf_file/0005/888341/10-08_Investment_Led_Growth_in_India_-_Hindu_Fact_or_Mythology.pdf
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Bibliographic Info

Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 10-08.

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Length: 18 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:uwa:wpaper:10-08

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Keywords: house prices; present value model; house price fundamentals; house price-income ratio; VAR/VEC modelling;

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  1. Rod Tyers, 2008. "Competition Policy, Corporate Saving and China's Current Account Surplus," ANU Working Papers in Economics and Econometrics 2008-496, Australian National University, College of Business and Economics, School of Economics.
  2. Robertson, Peter E, 2000. "Diminished Returns? Growth and Investment in East Asia," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 343-53, December.
  3. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2006. "Sources of Growth in the Indian Economy," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 3(1), pages 1-69.
  4. Kalpana Kochhar & Utsav Kumar & Raghuram Rajan & Arvind Subramanian, 2006. "India's Patterns of Development: What Happened, What Follows," NBER Working Papers 12023, National Bureau of Economic Research, Inc.
  5. Ashkok Kotwal & Bharat Ramaswami & Wilima Wadhwa, 2011. "Economic liberalization and Indian economic growth: What's the evidence?," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 11-13, Indian Statistical Institute, New Delhi, India.
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Cited by:
  1. Peter E Robertson, 2010. "Deciphering The Hindu Growth Epic," Economics Discussion / Working Papers 10-19, The University of Western Australia, Department of Economics.

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