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The 1991 Reforms, Indian Economic Growth, and Social Progress

Author

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  • Agarwal, Manmohan

    (Centre for International Governance Innovation)

  • Whalley, John

    (University of Western Ontario)

Abstract

This paper analyzes the effects of the reforms initiated in India following the balance of payments (BOP) crisis of 1991 on economic performance. We do not find persuasive the contention of many analysts that growth accelerated after the mid-1980s when reforms were initiated. Nor does statistical analysis support the contention that reforms in the mid-1980s resulted in a growth acceleration. We show that there is an accelerating rate of growth of GDP after the mid 1970s and it is difficult to relate this gradual acceleration to specific policy changes. The changed policies in the 1980s did not mean a basic change in the policy framework. Furthermore, since corporate investment as a share of GDP did not increase in the 1980s it is difficult to identify the mechanism by which the more pro-business policies of the government were translated to higher growth as claimed by Rodrik and Subramaniam (2005). We show that increasing exports of goods, non-factor services, and labour services, through remittances, played an important role in growth in India. Furthermore, the share of exports of goods and services grew as rapidly in India as in China, so that it cannot be said that growth in India was based more on domestic demand. The increased value of exports of manufactures was important as their value grew from about 16 percent of the manufacturing sector’s value added in the early 1980s to about 60 percent currently. Also, there is no significant difference between the growth rates of value-added in the manufacturing and services sectors except for the period of the Ninth Plan (1997-2001). We find that most of 12 economic indicators show improved performance in the decade 2001-10 compared to the earlier decade 1981-1990. The better performance consisted both in the level and lower variability. Furthermore, we find that the reforms had a gradual effect; the change in the period 1992-2000 was smaller and statistically less significant.

Suggested Citation

  • Agarwal, Manmohan & Whalley, John, 2013. "The 1991 Reforms, Indian Economic Growth, and Social Progress," CAGE Online Working Paper Series 128, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:128
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    References listed on IDEAS

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    1. Kenen,Peter B., 2000. "The International Economy," Cambridge Books, Cambridge University Press, number 9780521644358, May.
    2. Panagariya, Arvind, 2011. "India: The Emerging Giant," OUP Catalogue, Oxford University Press, number 9780199751563, June.
    3. Jagdish N. Bhagwati & T. N. Srinivasan, 1975. "Foreign Trade Regimes and Economic Development: India," NBER Books, National Bureau of Economic Research, Inc, number bhag75-1, April.
    4. Ashok Kotwal & Bharat Ramaswami & Wilima Wadhwa, 2011. "Economic Liberalization and Indian Economic Growth: What's the Evidence?," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1152-1199, December.
    5. Bhagwati, Jagdish, 1993. "India in Transition: Freeing the Economy," OUP Catalogue, Oxford University Press, number 9780198288473.
    6. Bhagwati, Jagdish N & Chakravarty, Sukhamoy, 1969. "Contributions to Indian Economic Analysis: A Survey," American Economic Review, American Economic Association, vol. 59(4), pages 2-73, Part II S.
    7. Jagdish N. Bhagwati, 1978. "Anatomy and Consequences of Exchange Control Regimes," NBER Books, National Bureau of Economic Research, Inc, number bhag78-1, April.
    8. Dani Rodrik & Arvind Subramanian, 2004. "Why India Can Grow At 7 Percent a Year or More; Projections and Reflections," IMF Working Papers 04/118, International Monetary Fund.
    9. Anne O. Krueger, 1978. "Liberalization Attempts and Consequences," NBER Books, National Bureau of Economic Research, Inc, number krue78-1, April.
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    Cited by:

    1. Shahbaz, Muhammad & Mallick, Hrushikesh & Mahalik, Mantu Kumar & Sadorsky, Perry, 2016. "The role of globalization on the recent evolution of energy demand in India: Implications for sustainable development," Energy Economics, Elsevier, vol. 55(C), pages 52-68.
    2. repec:eee:asieco:v:50:y:2017:i:c:p:46-61 is not listed on IDEAS

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    Keywords

    China;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F10 - International Economics - - Trade - - - General
    • F30 - International Economics - - International Finance - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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