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Deciphering The Hindu Growth Epic

  • Peter E Robertson

    (UWA Business School, The University of Western Australia)

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.

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Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 10-19.

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Length: 38 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:uwa:wpaper:10-19
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  1. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
  2. Barry Bosworth & Susan M. Collins & Arvind Virmani, 2007. "Sources of Growth in the Indian Economy," NBER Working Papers 12901, National Bureau of Economic Research, Inc.
  3. Athukorala, Prema-chandra & Sen, Kunal, 2004. "The Determinants of Private Saving in India," World Development, Elsevier, vol. 32(3), pages 491-503, March.
  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. Robert J. Barro & Jong-Wha Lee, 2010. "A New Data Set of Educational Attainment in the World, 1950-2010," NBER Working Papers 15902, National Bureau of Economic Research, Inc.
  6. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  7. Barry Bosworth & Susan M. Collins, 2008. "Accounting for Growth: Comparing China and India," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 45-66, Winter.
  8. 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.
  9. Rodrik, Dani & Subramanian, Arvind, 2004. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," Working Paper Series rwp04-013, Harvard University, John F. Kennedy School of Government.
  10. Charles R. Hulten & Sylaja Srinivasan, 1999. "Indian Manufacturing Industry: Elephant or Tiger? New Evidence on the Asian Miracle," NBER Working Papers 7441, National Bureau of Economic Research, Inc.
  11. Basu, Kaushik & Maertens, Annemie, 2007. "The Pattern and Causes of Economic Growth in India," Working Papers 07-08, Cornell University, Center for Analytic Economics.
  12. Panagariya, Arvind, 2008. "India: The Emerging Giant," OUP Catalogue, Oxford University Press, number 9780195315035, March.
  13. Francesco Caselli, 2004. "Accounting for Cross-Country Income Differences," NBER Working Papers 10828, National Bureau of Economic Research, Inc.
  14. Robertson, Peter E, 2000. "Diminished Returns? Growth and Investment in East Asia," The Economic Record, The Economic Society of Australia, vol. 76(235), pages 343-53, December.
  15. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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