ABSTRACT
The discourse on India’s economic growth begins from the time of independence. The analysis juxtaposes the period of recent growth to the low growth period up to 1980. The low growth rate of the Indian economy has been described as the ‘Hindu rate of growth’ (Lal, 1988). The recent upsurge in per capita GDP growth coincided with the break from the Nehruvian ideology of state-led development. The economic reforms introduced in the 1990s brought in significant changes in policy from regulation of economic activity to reliance on the market. However, the role of the government had begun to change slowly in the course of the 1980s, which saw fiscal expansion leading to a fiscal and balance of payments crisis in 1990. Consequently the IMF loan negotiated to resolve the crisis and the devaluation of the Indian rupee in 1991 marked a sharp departure from the policy regime of the past. This debate on India’s growth experience focuses on the timing of the structural break. Does it coincide with the 1991 devaluation, which categorically ushered in the market in different sectors of the economy? Does it go further back to 1980 when Indira Gandhi’s economic policies lost the populist rhetoric and became ‘pro business’? Several Indian economists have shown (e.g. Rodrik and Subramanian, 2005) that the Indian growth rate increased in the 1980s, well before the recent economic reforms. The question that rarely enters into the discussion is how does Indian growth experience
compare with the long-run performance. The picture since 1900 shows a discontinuity between India under colonial rule and under the policies of modernization that followed independence. A change in the policy regime that the economy experienced in the 1990s had also been seen in 1950 with the introduction of planned development. At that time it was a move from the laissez-faire policies of the colonial government to that of regulation of economic activity. This chapter attempts to place India’s current economic performance in the context of its long-run growth performance and in comparison with other newly industrializing countries. We start by reviewing the existing literature and situating India’s growth experience in the context of the long run, and then considering the performance of different sectors in the long run. We follow this with a discussion on comparative perspectives and the final section provides a conclusion.
