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Deciphering The Hindu Growth Epic

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  • Peter E Robertson

    (UWA Business School, The University of Western Australia)

Abstract

India’s investment rate has increased fourfold since 1950 and is now nearly 40% of GDP. Many studies have suggested that this rising investment rate is the most significant component of India’s growth acceleration. I assess these hypotheses using the neoclassical growth model decomposition method. Unlike other methods based on this model, such as Hall and Jones (QJE 1999), the method used in this paper does not rely on the assumption of steady state. I find that the rise in investment rates since the 1970s explains only 30% of India’s growth over that period. I conclude that, notwithstanding the high investment rates, the main source of India’s growth acceleration is the modest upward trend in productivity growth since the 1970s.

Suggested Citation

  • Peter E Robertson, 2010. "Deciphering The Hindu Growth Epic," Economics Discussion / Working Papers 10-19, The University of Western Australia, Department of Economics.
  • Handle: RePEc:uwa:wpaper:10-19
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    References listed on IDEAS

    as
    1. Kaushik Basu & Annemie Maertens, 2007. "The pattern and causes of economic growth in India," Oxford Review of Economic Policy, Oxford University Press, vol. 23(2), pages 143-167, Summer.
    2. Athukorala, Prema-chandra & Sen, Kunal, 2004. "The Determinants of Private Saving in India," World Development, Elsevier, vol. 32(3), pages 491-503, March.
    3. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2006. "Sources of Growth in the Indian Economy," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 3(1), pages 1-69.
    4. Peter E. Robertson, 2010. "Investment Led Growth In India: Hindu Fact or Mythology?," Economics Discussion / Working Papers 10-08, The University of Western Australia, Department of Economics.
    5. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
    6. Robertson, Peter E, 2000. "Diminished Returns? Growth and Investment in East Asia," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 343-353, December.
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    Keywords

    Economic Growth; India; Growth Accounting; Investment; Productivity;

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