Reforms and Economic Transformation in India

Reforms and Economic Transformation in India

Reforms and Economic Transformation in India

Reforms and Economic Transformation in India

Synopsis

Reforms and Economic Transformation in Indiais the second volume in the series Studies in Indian Economic Policies. The first volume,India's Reforms: How They Produced Inclusive Growth(OUP, 2012), systematically demonstrated that reforms-led growth in India led to reduced poverty among all social groups. They also led to shifts in attitudes whereby citizens overwhelmingly acknowledge the benefits that accelerated growth has brought them and as voters, they now reward the governments that deliver superior economic outcomes and punish those that fail to do so.

This latest volume takes as its starting point the fact that while reforms have undoubtedly delivered in terms of poverty reduction and associated social objectives, the impact has not been as substantial as seen in other reform-oriented economies such as South Korea and Taiwan in the 1960s and 1970s, and more recently, in China. The overarching hypothesis of the volume is that the smaller reduction in poverty has been the result of slower transformation of the economy from a primarily agrarian to a modern, industrial one. Even as the GDP share of agriculture has seen rapid decline, its employment share has declined very gradually. More than half of the workforce in India still remains in agriculture. In addition, non-farm workers are overwhelmingly in the informal sector. Against this background, the nine original essays by eminent economists pursue three broad themes using firm level data in both industry and services.

The papers in part I ask why the transformation in India has been slow in terms of the movement of workers out of agriculture, into industry and services, and from informal to formal employment. They address what India needs to do to speed up this transformation. They specifically show that severe labor-market distortions and policy bias against large firms has been a key factor behind the slow transformation. The papers in part II analyze the transformation that reforms have brought about within and across enterprises. For example, they investigate the impact of privatization on enterprise profitability. Part III addresses the manner in which the reforms have helped promote social transformation. Here the papers analyze the impact the reforms have had on the fortunes of the socially disadvantaged groups in terms of wage and education outcomes and as entrepreneurs.

Excerpt

This volume, the second in the series produced by the Columbia Program on Indian Economic Policies, turns to the analysis of the reforms from a different viewpoint than the first. It takes as its starting point the fact that while the reforms have undoubtedly delivered in terms of poverty reduction and associated social objectives, the impact has not been as substantial as it has been in other reform-oriented economies such as South Korea and Taiwan in the 1960s and 1970s and in China more recently. This is a puzzle whose explanation lies, we believe, in the fact that India’s reforms have had a significantly smaller impact on transforming the Indian economy. In a nutshell, the reforms have missed key ingredients and have thus had limited impact on the transformation of the Indian economy in its sectoral output and employment composition among agriculture, industry, and services, and within and across enterprises within sectors.

The empirical analysis in the present volume therefore points systematically to the lacuna in Indian reforms and the direction in which future reforms could go. It also complements the first volume in the series by marshaling further new evidence that the transformation of the economy also has an upside. The papers at the end of this volume give new evidence that reinforces the findings of the first volume. Not only has poverty declined among all social groups, including the historically disadvantaged ones, but the wage and education gap between the disadvantaged and the upper-caste groups has declined. Moreover, the socially disadvantaged have also shared in the increased prosperity as entrepreneurs. These findings indicate that the social transformation has been a beneficial aspect of the reforms.

Like the research papers in the first volume, those in the present one have profited from presentations at two major conferences that the Columbia Program organized. The first of these was held at Columbia University in New York on November 4–6, 2010, and the second one under the joint auspices of Columbia University and the National Council on Applied Economic Research (NCAER) in New Delhi on March 31–April 1, 2011. Dr. Rajesh Chadha, Senior Fellow, NCAER, collaborated with us for the second conference and oversaw its superb execution, while Dr. Shashanka Bhide, NCAER’s acting director general at that time, provided overall leadership for it. We are indebted to both of them.

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.