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India Transformed? Insights from the Firm Level 1988-2005

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  • Laura Alfaro
  • Anusha Chari

Abstract

Using firm-level data this paper analyzes the transformation of India's economic structure following the implementation of economic reforms. The focus of the study is on publicly-listed and unlisted firms in manufacturing and services industries. Detailed balance sheet and ownership information permit an investigation of a range of variables. We analyze firm characteristics shown by industry before and after liberalization and investigate how industrial concentration, number, and size of firms evolved between 1988 and 2005. We find great dynamism displayed by foreign and private firms as reflected in the growth in their numbers, assets, sales and profits. Yet, closer scrutiny reveals no dramatic transformation in the wake of liberalization. The story rather is one of an economy still dominated by the incumbents (state-owned firms) and to a lesser extent, traditional private firms (firms incorporated before 1985). Sectors dominated by state-owned and traditional private firms before 1988-1990, with assets, sales and profits representing shares higher than 50%, generally remained so in 2005. The exception to this broad pattern is the growing importance of new private firms in the services sector. Rates of return also have remained stable over time and show low dispersion across sectors and across ownership groups within sectors.

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  • Laura Alfaro & Anusha Chari, 2009. "India Transformed? Insights from the Firm Level 1988-2005," NBER Working Papers 15448, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15448
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    Cited by:

    1. Maria Bas & Ivan Ledezma, 2020. "Trade liberalization and heterogeneous firms’ adjustments: evidence from India," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(2), pages 407-441, May.
    2. Maria Bas & Antoine Berthou, 2017. "Does Input-Trade Liberalization Affect Firms’ Foreign Technology Choice?," World Bank Economic Review, World Bank Group, vol. 31(2), pages 351-384.
    3. Chidambaran, N.K. & Krishnakumar, Dipali & Sethi, Madhvi, 2018. "Cross-border vs. domestic acquisitions: Evidence from India," Journal of Economics and Business, Elsevier, vol. 95(C), pages 3-25.
    4. Mr. Ashoka Mody & Anusha Nath & Michael Walton, 2011. "Sources of Corporate Profits in India: Business Dynamism or Advantages of Entrenchment?," IMF Working Papers 2011/008, International Monetary Fund.
    5. Leslie A. Martin & Shanthi Nataraj & Ann E. Harrison, 2017. "In with the Big, Out with the Small: Removing Small-Scale Reservations in India," American Economic Review, American Economic Association, vol. 107(2), pages 354-386, February.
    6. Michael Keren, 2009. "China and India - a Note on the Influence of Hierarchy vs. Polyarchy on Economic Growth," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(2), pages 325-346, December.
    7. Albert Bollard & Peter Klenow & Gunjam Sharma, 2013. "India's Mysterious Manufacturing Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 59-85, January.
    8. Laura Alfaro & Anusha Chari, 2010. "Does Liberalization Promote Competition?," Working Papers 1112, School of International and Public Affairs, Columbia University, revised Oct 2010.
    9. Maria Bas, 2013. "Does Services Liberalization Affect Manufacturing Firms' Export Performance? Evidence from India," Working Papers 2013-17, CEPII research center.
    10. Maria Bas & Antoine Berthou, 2012. "The Unequal Effects of Financial Development on Firms' Growth in India," Working Papers 2012-22, CEPII research center.
    11. Sharma, Supriya, 2012. "Organizational Transformation in India: Developing a Typology," IIMA Working Papers WP2012-11-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
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    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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