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

Author

Listed:
  • Douhan, Robin

    (Research Institute of Industrial Economics (IFN))

  • Nordberg, Anders

    (Uppsala University)

Abstract

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.

Suggested Citation

  • Douhan, Robin & Nordberg, Anders, 2008. "Is the Elephant Stepping on its Trunk? The Problem of India's Unbalanced Growth," Working Paper Series 778, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0778
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    1. Ohlsson, Henry, 2011. "The legacy of the Swedish gift and inheritance tax, 1884–2004," European Review of Economic History, Cambridge University Press, vol. 15(3), pages 539-569, December.

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    More about this item

    Keywords

    Industrialization; India; Industrial Structure;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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