The Lack of Lewis Turning Point in India: Conceptualizing the Roles of Capital Intensity, Employment Opportunities, and Keynesian Investments

This research study aims to explain why the higher-growth phase in India, witnessed in the post-reform period of 1991–2011, failed to have the impact of significant increases in formal, modern sector employment or a transition toward the Lewis turning point. The article illustrates that it is more realistic to view a transition toward the Lewis turning point as involving increases in capital intensity. A desired increase in demand for labor will follow if the increases in capital intensity are associated with productivity growth in terms of increases in the share of intermediate goods specializations as output is increased. Autoregressive distributed lagged regression has been used to analyze whether investment behavior captures Young–Kaldor investments that can indicate growth in intermediate goods specialization. This is key to a higher pace of investment and specialized employment outcomes. The findings support existing literature, highlighting that increases in capital intensity constitute a significant factor explaining the lack of proper employment growth and the Lewis turning point. However, they also show that the problem is not with increases in capital intensity per se. Rather, the increases do not indicate dynamism regarding investments associated with intermediate goods specializations. JEL Classification O11, O14, O31