The Political Economy of India's Growth Episodes

112 Pages·2016·3.22 MB·English

by  Sabyasachi Kar

BUILDING A SUSTAINABLE
POLITICAL ECONOMY: SPERI
RESEACH & POLICY
Series Editors: C. Hay and A. Payne
THE POLITICAL
ECONOMY OF
INDIA’S GROWTH
EPISODES
Sabyasachi Kar
and Kunal Sen
Building a Sustainable Political Economy: SPERI
Research & Policy
Series Editors
COLIN   HAY
UNIVERSITY OF SHEFFIELD
DEPARTMENT OF POLITICS
SHEFFIELD S10 2TU ,   UNITED KINGDOM
Anthony   Payne
S1 4DP ,   UNITED KINGDOM
Aims of the Series
The Sheffi eld Political Economy Research Institute (SPERI) is an
innovation in higher education research and outreach. It brings together
leading international researchers in the social sciences, policy makers,
journalists and opinion formers to reassess and develop proposals in
response to the political and economic issues posed by the current
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threat. Building a Sustainable Political Economy: SPERI Research &
Policy will serve as a key outlet for SPERI’s published work. Each title
will summarise and disseminate to an academic and postgraduate student
audience, as well as directly to policy-makers and journalists, key policy-
oriented research fi ndings designed to further the development of a more
sustainable future for the national, regional and world economy following
the global fi nancial crisis. It takes a holistic and interdisciplinary view of
political economy in which the local, national, regional and global interact
at all times and in complex ways. The SPERI research agenda, and hence
the focus of the series, seeks to explore the core economic and political
questions that require us to develop a new sustainable model of political
economy.t at all times and in complex ways. The SPERI research agenda,
and hence the focus of the series, seeks to explore the core economic and
political questions that require us to develop a new sustainable model of
political economy.
More information about this series at
http://www.springer.com/series/14879
Sabyasachi   Kar • K unal   Sen
The Political
Economy of India’s
Growth Episodes
Sabyasachi   Kar Kunal   Sen
Institute of Economic Growth University of Manchester
University of Delhi Manchester, Lancashire
India United Kingdom
Building a Sustainable Political Economy: SPERI Research & Policy
ISBN 978-1-352-00025-2 ISBN 978-1-352-00026-9 (eBook)
DOI 10.1057/978-1-352-00026-9
Library of Congress Control Number: 2016956118
© The Editor(s) (if applicable) and The Author(s) 2 016
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A
CKNOWLEDGEMENTS
We would like to thank Surbhi Sharma and Chandan Kumar Mohanty
for their help with the case studies. We would also like to thank Michael
Walton for the use of a graph from his article in the Economic and Political
Weekly . We would like to acknowledge the valuable and insightful com-
ments of the two anonymous reviewers as well as of the series editors,
Colin Hay and Anthony Payne. We would like to thank Anthony Payne
in particular for suggesting that we write a book on India’s political
economy of growth. Parts of the book were presented in a workshop in
India International Centre, Delhi, in 2015 and in the American Economic
Association meetings in 2016, and we acknowledge the comments received
from participants in these two events. We are especially thankful for the
comments received from Pratap Bhanu Mehta.
v
C
ONTENTS
1 A Political Economy Reading of India’s Growth Experience 1
2 A Political Economy Theory of Growth Episodes 1 7
3 Stagnation and a Nascent Recovery: The Growth Episode
of 1950–1992 29
4 Onset of High Growth: The Growth Episode of 1993–2001 45
5 Rapid Growth and Limited Structural Transformation:
The Growth Episode of 2002–2010 57
6 The Post-2010 Growth Slowdown and a Debatable
Partial Recovery 7 7
7 Politics, Institutions, Episodes: Concluding Observations 91
References 9 7
Index 103
vii
L A
IST OF BBREVIATIONS
AIADMK A ll India Anna Dravida Munnetra Kazhagam
ASI A nnual Survey of Industries
BJP B haratiya Janata Party
BP B ai-Perron
BSNL B harat Sanchar Nigam Limited
CAG C omptroller and Auditor General
CBI C entral Bureau of Investigation
CII C onfederation of Indian Industries
CSO C entral Statistical Organisation
DMK D ravida Munnetra Kazhagam
DoT D epartment of Telecommunications
FCFS P olicy of First Come, First Served
FERRA F oreign Exchange Regulation Act
FICCI F ederation of Indian Chambers of Commerce and Industry
GCF G ross Capital Formation
GCFPUB G ross Capital Formation in Public Sector
GCFPVT G ross Capital Formation in Private Sector
GCFPVTCOR G ross Capital Formation in Private Corporate Sector
GCFPVTHH G ross Capital Formation in Household Sector
GDP G ross domestic Product
GVA G ross Value Added
ICRG I nternational Country Risk Guide
IIP I ndex of Industrial Production
INC I ndian National Congress
IRDA I nsurance Regulatory and Development Authority
IT Information and technology
JD Janata Dal
ix
x LIST OF ABBREVIATIONS
JP Janata Party
MCA21 M inistry of Corporate Affairs
MOEF M inistry of Environment and Forests
MRTP M onopolies and Restrictive Trade Practices Act
NDA N ational Democratic Alliance
NSC N ational Statistical Commission
NTP N ational Telecom Policy
PFRDA P ension Fund Regulatory and Development Authority
PVT P rivate
RS Rodrik and Subramanian
SEBI S ecurities and Exchange Board of India
UB United Breweries
UPA U nited Progressive Alliance
L F
IST OF IGURES
Fig. 1.1 Annual growth of per capita output (per cent per annum) 3
Fig. 1.2 Decadal averages of growth of per capita output
(per cent per annum) 4
Fig. 2.1 Transition paths between growth states 18
Fig. 2.2 A framework for understanding growth episodes 27
Fig. 3.1 Annual growth rates, agriculture, industry, services, 1950–1992 31
Fig. 3.2 Decadal average annual growth rates, agriculture, industry,
services, 1950–1992 32
Fig. 3.3 Sectoral shares in GDP, agriculture, industry, services, 1950–1992 32
Fig. 3.4 Public investment as a ratio of GDP, 1950–1992 33
Fig. 3.5 Private investment as a ratio of GDP, 1950–1992 33
Fig. 3.6 Total Factor Productivity Growth (TFPG), 1960–1993 34
Fig. 4.1 Gross capital formation (investment) as percentage of GDP 47
Fig. 4.2 Private sector gross capital formation (investment) as
percentage of GDP 48
Fig. 4.3 Sectoral average growth rates, 1993–2001 49
Fig. 4.4 Export structure, 1985 49
Fig. 4.5 Export Structure, 1995 50
Fig. 4.6 Export structure, 2001 50
Fig. 4.7 Private corporate investment in equipment and construction,
1950–2001 54
Fig. 5.1 The relative importance of the rentier, powerbroker,
magician and workhorse sectors 61
Fig. 5.2 Measure of structural transformation (Hausmann-Hidalgo
measure of product complexity), fi ve-year moving average 62
Fig. 5.3 India’s Exports, 1995–2011 64
xi