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Is the Elephant Stepping on its Trunk? The Problem of India's Unbalanced Growth

  • Douhan, Robin

    (Research Institute of Industrial Economics (IFN))

  • Nordberg, Anders


    (Uppsala University)

It is often assumed that recent success in the high-technology software industry will lead India's development. However, evidence suggest that basic manufacturing industry is stagnant. This paper proposes a mechanism that ties these two trends together. A big-push type of model, featuring linkages between firms, demand spill-over, and technology choice is elaborated. By imposing different cost structures on the manufacturing and high-technology industries the model describes outcome in terms of distribution between sectors. It is found that a policy which promotes a high-technology sector can have negative effects on the manufacturing industry as well as aggregate income. Directing resources towards infrastructure, on the other hand, benefits all sectors and increases aggregate income. The results from the model are found to correspond with the recent development pattern in India.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 778.

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Length: 31 pages
Date of creation: 26 Nov 2008
Date of revision:
Handle: RePEc:hhs:iuiwop:0778
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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