"Hindu growth"? The mystery of India's productivity surge

Around 1980 India's productivity unexpectedly surged - more than a decade before serious economic reforms were initiated. Why? Dani Rodrik and Arvind Subramanian try to explain this curious phenomenon in the latest IMF Staff Papers in From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition:

Trade liberalization, expansionary demand, a favorable external environment, and improved agricultural performance did not play a role. We find evidence that the trigger may have been an attitudinal shift by the government in the early 1980s that, unlike the reforms of the 1990s, was probusiness rather than promarket in character, favoring the interests of existing businesses rather than new entrants or consumers. A relatively small shift elicited a large productivity response, because India was far away from its income-possibility frontier. Registered manufacturing, which had been built up in previous decades, played an important role in determining which states took advantage of the changed environment.

The discussant, T.N. Srinivasan at Yale University, is unimpressed: this is "a disappointing paper", reflecting "ignorance run amok ..about the essential features of the Indian economy of the 1980s". Rodrik and Subramanian post a more temperate reply. A good read for those wanting better to understand India's growth record over the past two decades.

UPDATE: Brad DeLong has also now picked up this article.

Comments

[Atanu Dey]

India's economic growth since 1947 to about the mid-80s was dismal by any standard and was the result of Nehruvian socialistic command and control policies. It is interesting that once again Hindus have to be blamed for Nehru's screwup. Nehru was emphatically anti-Hindu and India (80% of which is Hindu) suffered as a direct consequence of Nehru's policies. I call the dismal economic growth of India as the "F**k-up Nehru" growth or FUN rate of economic growth. My vehemence in this regard is because as a Hindu I am offended by morons who attribute to Hindus Nehru's clueless policies. Nehru was a champion screwup. His cluelessness was all-encompassing and omnipotent -- he messed up industrial policy, domestic policy, international policy, labor policy, agricultural policy, the list goes on.

Calling the FuN rate of economic growth "Hindu-rate" is adding insult to injury. Hindus can do without it.