## _wp04118

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---

### I. INTRODUCTION
- India’s per capita economic growth rate rose from 1.7 percent in 1950–80 to 3.8 percent in 1980–2000.
- Recent indicators motivating optimism:
  - rebound in the Indian economy in 2003/04 with expectations of 8 percent growth;
  - surge in international reserves and the stock market;
  - continuing boom in the Information Technology (IT) sector.
- Central growth forecast (drawing on Rodrik and Subramanian, 2004):
  - about 7 percent per year for output for the next 20 years;
  - or 5.6 percent for per capita output for the next 20 years.
- Caveats:
  - A decline in interest rates can provide temporary impetus but is not by itself a basis for sustaining higher trend growth rates of productivity or output per capita.
  - The fiscal picture is described as “possibly the diciest”; rising rather than declining interest rates are considered more likely in the future.
  - Some prominent analyses (e.g., Lall, 2003; Goldman Sachs, 2003) are assessed as problematic or methodologically inconsistent.

### II. INDIA’S ECONOMIC PERFORMANCE SINCE 1980 — Key empirical findings
- Three notable features over the last two decades:
  - High growth of output per capita at 3.8 percent per year, surpassed only by China and the East Asian countries.
  - India exhibited the most stable growth (smallest standard deviation of output per worker).
  - The contribution of growth of total factor productivity (TFP) to overall labor productivity growth was about 60 percent—highest in India and only surpassed by China.
- Interpretation:
  - Indian per capita income growth has been extensive—motored by productivity—and hence more likely sustainable than growth based mainly on capital accumulation facing diminishing returns.

### III. INDIA DURING 2005–25: A GROWTH ACCOUNTING EXERCISE
- Solow growth accounting equation:
  - y = αk + (1-α) l + a
  - where y, k, l, and a represent growth in, respectively, output, capital, labor, and total factor productivity.
- Parameter and baseline assumptions:
  - α assumed equal to 0.35 (as in Bosworth and Collins (2003)).
  - Total factor productivity (TFP) assumed to grow at about 2.5 percent per year (same pace as in the last two decades).
- Physical capital accumulation and savings:
  - Population forecasts: dependency ratio declines from 0.62 in 2000 to 0.48 in 2025 (a 14 percentage point decline).
  - This decline is assumed to translate into a roughly equivalent rise in private and aggregate savings, from about 25 percent of GDP to 39 percent of GDP.
  - Assuming external borrowing/lending remains broadly unchanged, rising savings allow an equivalent increase in domestic investment.
  - Implied rate of growth of the capital stock: about 8.3 percent per year in the outer years, up from about 6 percent currently.
  - The growth in the capital stock together with growth in factor productivity will yield output growth of 5.4 percent.
- Labor and human capital assumptions:
  - Working age population projected to grow at 1.9 percent per year.
  - If educational attainment and participation rates remain unchanged, labor growth will contribute 1.3 percent.
  - These assumptions yield:
    - an aggregate growth rate of 6.7 percent per year;
    - a per capita growth rate of 5.3 percent.
  - Note: favorable demographics arise from India’s labor force growth exceeding population growth by about 0.5 percent per year.
- Additional notes:
  - The 5.3 percent per capita growth rate is characterized as a lower bound estimate.
  - Over a 40-year period, a 5.3 percent growth rate would increase the income of the average person nearly 8-fold.
  - Rapid capital accumulation is not expected to sharply reduce the marginal product of capital because of simultaneous growth in TFP.

### IV. UPSIDE POTENTIAL — preview of themes
- Many factors suggest that there is upside potential to the baseline forecast.
- Empirical evidence underpinning upside potential includes:
  - TFP’s large historical contribution to labor productivity growth (about 60 percent).
  - Improvements in stability and the recent acceleration of per capita growth (from 1.7 percent to 3.8 percent across periods).
- Further upside discussion follows under “Within the Total Factor Productivity (TFP) Frontier.”

### Prospects for TFP-Enhancing Reforms
- Empirical evidence from simple regressions of TFP on the deep determinants of development (as in Rodrik, Subramanian and Trebbi, 2004a) suggests:
  - India’s level of TFP is between 1/3 and 40 percent of what it should be.
  - This creates scope for productivity improvements based on catching up.
- Reforms since the late 1990s have picked up pace in telecommunications, electricity, transport, and privatization (see Kelkar, 2004).
- Reforms are shifting from crisis-driven to success-driven, increasing the likelihood they will be sustained and not subject to major reversals.
- As reforms proceed apace, the level and pace of TFP improvements will be enhanced.

### Institutions
- India’s institutional quality is an underrated strength and important for upside optimism.
- Regression evidence (Rodrik and Subramanian (2004b)) indicates:
  - The India “dummy” suggests India’s per capita income should be about 4-5 times what it currently is.
  - India has built good economic and political institutions—a stable democratic polity, reasonable rule of law and protection of property rights—but until the 1980s failed to take full advantage of them.
- Implications:
  - Near-future growth can rely on exploiting existing institutions rather than on transforming institutions.
  - Strong institutions confer resilience to shocks; countries with good institutions do not in general experience large declines in growth (Rodrik, 1999; Acemoglu et. al., 2002).

### Skilled Human Capital
- High levels of human capital are key to exploiting technological progress (see Coe, Helpman, and Hoffmaister, 1997).
- India’s productivity growth in the last two decades, beyond IT, has benefited from its stock of highly educated human capital.
- Reinforcing factors:
  - Growing location of R&D facilities in India—in pharmaceuticals, software and other IT-services—by foreign companies will enhance dynamic benefits.
  - Over the last three-four decades a substantial share of skilled labor moved overseas; cyclical and structural changes are reducing emigration and increasing domestic opportunities.
- Effects of retaining high-skilled labor domestically:
  - Greater scope for spillover benefits to the Indian economy.
  - Outsourcing allows India to reap static efficiency benefits without foregoing dynamic benefits from labor emigration.
- In the growth accounting framework, growth in the skilled labor force available for domestic activity will be greater than in the past because of less emigration and possible return migration.

### Less-Skilled Human Capital
- Two key unknowns: future participation rates and basic educational attainment.
- Base-case assumption: participation rates remain constant over the next 20 years.
- Potential impact of increased participation:
  - A 10 percentage point increase in the participation rate over the next 20 years would add another 0.3-0.4 percentage points to growth rates.
- Educational attainment trajectory:
  - Amartya Sen highlighted disappointing post-Independence improvements in literacy rates, especially among women.
  - Increasing opportunities and higher private returns to basic education (Munshi and Rosenzweig, 2003) could raise demand for educational services and outcomes.
  - In such an event, the potential growth rate could reach as high as 8 percent.

### Downside Risks
A. Impact of Information Technology (IT): Accounting Versus Spillovers
- Skeptical view: IT cannot be a long-run source of growth because it accounts for a small share of GDP and employment.
- Demand-linkage response is limited by accounting logic: a very small part of the economy must grow implausibly fast to lift the whole economy.
- More persuasive response: IT can affect long-run supply capacity by raising returns to education and durably boosting demand for educational services.
  - Anecdotal evidence: mushrooming of English-language schools in backward states such as Bihar and the agricultural hinterland of Punjab.
  - Systematic evidence (Munshi and Rosenzweig, 2003) from Mumbai shows increased returns to education lead to expanded school enrollment by women and changes in caste structures.
- Historical parallel: registered manufacturing accounted for less than 10 percent of total output yet played a key role in overall economic performance in the 1980s and 1990s (Rodrik and Subramanian, 2004b), suggesting potential supply externalities from small sectors.

B. Divergence
- Last two decades show growing disparity between two groups of states: peninsular India growing more rapidly than the hinterland BIMARU states.
- Trend could widen as existing advantages are reinforced by new technologies, producing disparities between skilled (typically urban) and semi- and low-skilled labor (typically rural).
- Divergence is both a concern and a consequence of competition among states to improve institutions and policies—a potential “race to the top.”
- Possible self-limiting mechanism: lagging states may be pressured to follow successful states or face severe consequences in an internal market with free movement of capital and labor.
- Note: India has not yet witnessed labor movement commensurate with divergence (Cashin and Sahay, 1996), though capital flows are sensitive to state-level policies and inter-state labor flows could accelerate over time.

C. Institutions
- India’s institutional rankings:
  - Economic institutions: fourth decile in a global sample, second decile amongst developing countries.
  - Political institutions: 51st in a sample of 173 countries and 14th in a sample of 84 developing countries.
- Historical decline in meta-institutions since the first two to three decades after independence, aggravated by rent-seeking under controls.
- Countervailing trends that could arrest or reverse decline:
  - Sharp rise in transparency due to explosion in quantity and quality of the media.
  - A vibrantly assertive civil society delivering development outcomes and holding public institutions accountable.
  - Policy liberalization eroding the license-quota-permit raj as a source of corruption and patronage.

D. Agriculture
- Conventional wisdom: India remains beholden to the monsoon because agriculture accounts for a large share of GDP.
- Between 1980 and 2000, agriculture’s share in GDP declined by 16 percentage points to about 22 percent.
- Projection: Another 25 years of growth along the lines of the 1990s will shrink agriculture’s share to about 12 percent, reducing its grip on the economy.
- Nonetheless, a series of droughts could drag down the growth trajectory.

E. Fiscal Situation
- Large and widening deficits and rising public indebtedness pose threats to future stability and growth.
- India’s government debt-to-GDP ratio is at about 90 percent, exceeding that of many emerging market countries, including Brazil and Argentina.
- A larger fraction of debt is held by residents, which partly mitigates acute crisis risk.
- Paradox: rising indebtedness has accompanied foreign capital inflows and declining real interest rates.
- Possible explanations:
  - Markets may be understating risks (procyclical boom phase).
  - Market confidence in Indian creditworthiness may be grounded in an unblemished record of no-default and low inflation.
  - As Reinhart, Rogoff, and Savastano (2003) show, markets set different debt thresholds by country history of inflation or default; India’s institutional checks may justify relatively greater market tolerance.

F. India and China En Passant
- Regression of income on deep determinants with India and China dummies (Table 3) shows in 1999:
  - India was an underperformer, China an overperformer given institutional quality—disparity especially pronounced in political institutions.
- Implications:
  - India’s future growth will be relatively “easy” as a reversion to the mean (realizing already-created potential).
    - Footnote: India will be merely reverting to the mean until its current level of income quadruples, which at a per capita growth rate of 5.3 percent per year will take about 25 years.
  - China faces the harder task of institutional transformation—opening political system, overhauling property regime, rewriting legal system—and is therefore more fragile despite rapid recent growth.

### Empirical Contributions to Growth (selected figures from Bosworth and Collins (2003) reproduced in text)
- Industrial Countries:
  - 1960–80: Output 4.42; Productivity 1.30
  - 1980–99: Output 2.68; Productivity 0.64
  - 1960–99: Output 3.57; Productivity 0.98
- East Asia (including China):
  - 1960–80: Output 5.64; Productivity 0.96
  - 1980–99: Output 8.03; Productivity 3.25
  - 1960–99: Output 6.80; Productivity 2.07
- China:
  - 1960–80: Output 4.04; Productivity 0.64
  - 1980–99: Output 9.75; Productivity 4.71
  - 1960–99: Output 6.78; Productivity 2.60
- India:
  - 1960–80: Output 3.41; Productivity 0.12
  - 1980–99: Output 5.73; Productivity 2.05
  - 1960–99: Output 4.53; Productivity 1.06
- Latin America, Africa, Middle East entries are reported in the table but include negative and anomalous figures in some periods as presented in the source.

### Concluding Remarks and Policy Guidance
- Economic development arises from interaction between growth triggers and fundamentals that allow triggers to be exploited.
- India’s recent growth reflects both triggers (e.g., IT boom) and accumulated fundamentals (pools of skilled human capital, meta-institutions of democracy, rule of law, free press, technocratic bureaucracy).
- Since the 1980s, gradual removal of shackles on the private sector and appropriate triggers are in place to exploit fundamentals.
- Policy guidance:
  - Avoid the Latin America mistake of hastily pursuing liberalization and privatization that outruns institutional capacity.
  - Sustain private-sector investment incentives with pragmatic policies combining carrots and sticks, incentives for dynamic efficiency, and market disciplines.
  - Temper rapid moves on privatization (especially infrastructure), labor market reform, and capital-account liberalization with serious empirical analysis and concern for social and distributional impacts.
  - The habitual pragmatism and gradualism of Indian policymaking, driven by managing pluralism and diversity, is an asset.

*Source: _wp04118 - 2.5 percent per year has been achieved with relatively modest reforms, particularly in the (PDF chapter/section).*

### References..............................................................................................................

### _wp04118 - References..............................................................................................................

### I. INTRODUCTION
- India’s per capita economic growth rate rose from 1.7 percent in 1950–80 to 3.8 percent in 1980–2000.
- Recent indicators motivating optimism include: the rebound in the Indian economy in 2003/04 with expectations of 8 percent growth; the surge in international reserves and the stock market; and the continuing boom in the Information Technology (IT) sector.
- The paper’s central growth forecast (drawing on Rodrik and Subramanian, 2004) is:
  - about 7 percent per year for output for the next 20 years;
  - or 5.6 percent for per capita output for the next 20 years.
- Caveats on simplistic optimism:
  - A decline in interest rates can provide temporary impetus but is not by itself a basis for sustaining higher trend growth rates of productivity or output per capita.
  - The fiscal picture is described as “possibly the diciest”; rising rather than declining interest rates are considered more likely in the future.
  - Some prominent analyses (e.g., Lall, 2003; Goldman Sachs, 2003) are assessed as problematic or methodologically inconsistent.

### II. INDIA’S ECONOMIC PERFORMANCE SINCE 1980 — Key empirical findings
- Three notable features over the last two decades:
  - High growth of output per capita at 3.8 percent per year, surpassed only by China and the East Asian countries.
  - India exhibited the most stable growth (smallest standard deviation of output per worker).
  - The contribution of growth of total factor productivity (TFP) to overall labor productivity growth was about 60 percent—highest in India and only surpassed by China.
- Interpretation: Indian per capita income growth has been extensive—motored by productivity—and hence more likely sustainable than growth based mainly on capital accumulation facing diminishing returns.

### III. INDIA DURING 2005–25: A GROWTH ACCOUNTING EXERCISE
- Solow growth accounting equation presented:
  - y = αk + (1-α) l + a
  - where y, k, l, and a represent growth in, respectively, output, capital, labor, and total factor productivity.
- Parameter and baseline assumptions:
  - α assumed equal to 0.35 (as in Bosworth and Collins (2003)).
  - Total factor productivity (TFP) assumed to grow at about 2.5 percent per year (same pace as in the last two decades).
- Physical capital accumulation and savings:
  - Population forecasts: dependency ratio declines from 0.62 in 2000 to 0.48 in 2025 (a 14 percentage point decline).
  - This decline is assumed to translate into a roughly equivalent rise in private and aggregate savings, from about 25 percent of GDP to 39 percent of GDP.
  - Assuming external borrowing/lending remains broadly unchanged, rising savings allow an equivalent increase in domestic investment.
  - This implies a rate of growth of the capital stock of about 8.3 percent per year in the outer years, up from about 6 percent currently.
  - The growth in the capital stock together with growth in factor productivity will yield output growth of 5.4 percent.
- Labor and human capital assumptions:
  - Working age population projected to grow at 1.9 percent per year.
  - If educational attainment and participation rates remain unchanged, labor growth will contribute 1.3 percent.
  - These assumptions yield:
    - an aggregate growth rate of 6.7 percent per year;
    - a per capita growth rate of 5.3 percent.
  - Note: favorable demographics arise from India’s labor force growth exceeding population growth by about 0.5 percent per year.
- Additional notes:
  - The 5.3 percent per capita growth rate is characterized as a lower bound estimate.
  - Over a 40-year period, a 5.3 percent growth rate would increase the income of the average person nearly 8-fold.
  - Rapid capital accumulation is not expected to sharply reduce the marginal product of capital because of simultaneous growth in TFP.

### IV. UPSIDE POTENTIAL — preview of themes
- The paper signals there is upside potential to the baseline forecast, noting “Many factors suggest that there is upside potential to this forecast.”
- Earlier empirical evidence underpinning upside potential includes:
  - TFP’s large historical contribution to labor productivity growth (about 60 percent).
  - Improvements in stability and the recent acceleration of per capita growth (from 1.7 percent to 3.8 percent across periods).
- The text indicates further discussion of upside factors will follow under the section titled “Within the Total Factor Productivity (TFP) Frontier.”

*Source: _wp04118 - References..............................................................................................................*

### 2.5 percent per year has been achieved with relatively modest reforms, particularly in the

### _wp04118 - 2.5 percent per year has been achieved with relatively modest reforms, particularly in the

### Prospects for TFP-Enhancing Reforms
- Empirical evidence from simple regressions of TFP on the deep determinants of development (as in Rodrik, Subramanian and Trebbi, 2004a) suggests:
  - India’s level of TFP is between 1/3 and 40 percent of what it should be.
  - This creates scope for productivity improvements based on catching up.
- Reforms since the late 1990s have picked up pace in telecommunications, electricity, transport, and privatization (see Kelkar, 2004).
- Reforms are shifting from being crisis-driven to success-driven, increasing the likelihood they will be sustained and not subject to major reversals.
- As reforms proceed apace, the level and pace of TFP improvements will be enhanced.

### Institutions
- India’s institutional quality is an underrated strength and important for upside optimism.
- Regression evidence (Rodrik and Subramanian (2004b)) indicates:
  - The India “dummy” suggests India’s per capita income should be about 4-5 times what it currently is.
  - India has built good economic and political institutions—a stable democratic polity, reasonable rule of law and protection of property rights—but until the 1980s failed to take full advantage of them.
- Implications:
  - Near-future growth can rely on exploiting existing institutions rather than on transforming institutions.
  - Strong institutions confer resilience to shocks; countries with good institutions do not in general experience large declines in growth (Rodrik, 1999; Acemoglu et. al., 2002).

### Skilled Human Capital
- High levels of human capital are key to exploiting technological progress (see Coe, Helpman, and Hoffmaister, 1997).
- India’s productivity growth in the last two decades, beyond IT, has benefited from its stock of highly educated human capital.
- Reinforcing factors:
  - Growing location of R&D facilities in India—in pharmaceuticals, software and other IT-services—by foreign companies will enhance dynamic benefits.
  - Over the last three-four decades a substantial share of skilled labor moved overseas; cyclical and structural changes are reducing emigration and increasing domestic opportunities.
- Effects of retaining high-skilled labor domestically:
  - Greater scope for spillover benefits to the Indian economy.
  - Outsourcing allows India to reap static efficiency benefits without foregoing dynamic benefits from labor emigration.
- In the growth accounting framework, growth in the skilled labor force available for domestic activity will be greater than in the past because of less emigration and possible return migration.

### Less-Skilled Human Capital
- Two key unknowns: future participation rates and basic educational attainment.
- Base-case assumption: participation rates remain constant over the next 20 years.
- Potential impact of increased participation:
  - A 10 percentage point increase in the participation rate over the next 20 years would add another 0.3-0.4 percentage points to growth rates.
- Educational attainment trajectory:
  - Amartya Sen highlighted disappointing post-Independence improvements in literacy rates, especially among women.
  - Increasing opportunities and higher private returns to basic education (Munshi and Rosenzweig, 2003) could raise demand for educational services and outcomes.
  - In such an event, the potential growth rate could reach as high as 8 percent.

### Downside Risks

A. Impact of Information Technology (IT): Accounting Versus Spillovers
- Skeptical view: IT cannot be a long-run source of growth because it accounts for a small share of GDP and employment.
- Demand-linkage response is limited by accounting logic: a very small part of the economy must grow implausibly fast to lift the whole economy.
- More persuasive response: IT can affect long-run supply capacity by raising returns to education and durably boosting demand for educational services.
  - Anecdotal evidence: mushrooming of English-language schools in backward states such as Bihar and the agricultural hinterland of Punjab.
  - Systematic evidence (Munshi and Rosenzweig, 2003) from Mumbai shows increased returns to education lead to expanded school enrollment by women and changes in caste structures.
- Historical parallel: registered manufacturing accounted for less than 10 percent of total output yet played a key role in overall economic performance in the 1980s and 1990s (Rodrik and Subramanian, 2004b), suggesting potential supply externalities from small sectors.

B. Divergence
- Last two decades show growing disparity between two groups of states: peninsular India growing more rapidly than the hinterland BIMARU states.
- Trend could widen as existing advantages are reinforced by new technologies, producing disparities between skilled (typically urban) and semi- and low-skilled labor (typically rural).
- Divergence is both a concern and a consequence of competition among states to improve institutions and policies—a potential “race to the top.”
- Possible self-limiting mechanism: lagging states may be pressured to follow successful states or face severe consequences in an internal market with free movement of capital and labor.
- Note: India has not yet witnessed labor movement commensurate with divergence (Cashin and Sahay, 1996), though capital flows are sensitive to state-level policies and inter-state labor flows could accelerate over time.

C. Institutions
- India’s institutional rankings:
  - Economic institutions: fourth decile in a global sample, second decile amongst developing countries.
  - Political institutions: 51st in a sample of 173 countries and 14th in a sample of 84 developing countries.
- Historical decline in meta-institutions since the first two to three decades after independence, aggravated by rent-seeking under controls.
- Countervailing trends that could arrest or reverse decline:
  - Sharp rise in transparency due to explosion in quantity and quality of the media.
  - A vibrantly assertive civil society delivering development outcomes and holding public institutions accountable.
  - Policy liberalization eroding the license-quota-permit raj as a source of corruption and patronage.

D. Agriculture
- Conventional wisdom: India remains beholden to the monsoon because agriculture accounts for a large share of GDP.
- Between 1980 and 2000, agriculture’s share in GDP declined by 16 percentage points to about 22 percent.
- Projection: Another 25 years of growth along the lines of the 1990s will shrink agriculture’s share to about 12 percent, reducing its grip on the economy.
- Nonetheless, a series of droughts could drag down the growth trajectory.

E. Fiscal Situation
- Large and widening deficits and rising public indebtedness pose threats to future stability and growth.
- India’s government debt-to-GDP ratio is at about 90 percent, exceeding that of many emerging market countries, including Brazil and Argentina.
- A larger fraction of debt is held by residents, which partly mitigates acute crisis risk.
- Paradox: rising indebtedness has accompanied foreign capital inflows and declining real interest rates.
- Possible explanations:
  - Markets may be understating risks (procyclical boom phase).
  - Market confidence in Indian creditworthiness may be grounded in an unblemished record of no-default and low inflation.
  - As Reinhart, Rogoff, and Savastano (2003) show, markets set different debt thresholds by country history of inflation or default; India’s institutional checks may justify relatively greater market tolerance.

F. India and China En Passant
- Regression of income on deep determinants with India and China dummies (Table 3) shows in 1999:
  - India was an underperformer, China an overperformer given institutional quality—disparity especially pronounced in political institutions.
- Implications:
  - India’s future growth will be relatively “easy” as a reversion to the mean (realizing already-created potential).
    - Footnote: India will be merely reverting to the mean until its current level of income quadruples, which at a per capita growth rate of 5.3 percent per year will take about 25 years.
  - China faces the harder task of institutional transformation—opening political system, overhauling property regime, rewriting legal system—and is therefore more fragile despite rapid recent growth.

### Empirical Contributions to Growth (selected figures from Bosworth and Collins (2003) table reproduced in text)
- Industrial Countries:
  - 1960–80: Output 4.42; Productivity 1.30
  - 1980–99: Output 2.68; Productivity 0.64
  - 1960–99: Output 3.57; Productivity 0.98
- East Asia (including China):
  - 1960–80: Output 5.64; Productivity 0.96
  - 1980–99: Output 8.03; Productivity 3.25
  - 1960–99: Output 6.80; Productivity 2.07
- China:
  - 1960–80: Output 4.04; Productivity 0.64
  - 1980–99: Output 9.75; Productivity 4.71
  - 1960–99: Output 6.78; Productivity 2.60
- India:
  - 1960–80: Output 3.41; Productivity 0.12
  - 1980–99: Output 5.73; Productivity 2.05
  - 1960–99: Output 4.53; Productivity 1.06
- Latin America, Africa, Middle East entries are reported in the table but include negative and anomalous figures in some periods as presented in the source.
- Source: Bosworth and Collins (2003) (table reproduced in the source text).

### Concluding Remarks
- Economic development arises from interaction between growth triggers and fundamentals that allow triggers to be exploited.
- India’s recent growth reflects both triggers (e.g., IT boom) and accumulated fundamentals (pools of skilled human capital, meta-institutions of democracy, rule of law, free press, technocratic bureaucracy).
- Since the 1980s, gradual removal of shackles on the private sector and appropriate triggers are in place to exploit fundamentals.
- Policy guidance:
  - Avoid the Latin America mistake of hastily pursuing liberalization and privatization that outruns institutional capacity.
  - Sustain private-sector investment incentives with pragmatic policies combining carrots and sticks, incentives for dynamic efficiency, and market disciplines.
  - Temper rapid moves on privatization (especially infrastructure), labor market reform, and capital-account liberalization with serious empirical analysis and concern for social and distributional impacts.
  - The habitual pragmatism and gradualism of Indian policymaking, driven by managing pluralism and diversity, is an asset.

*Italic: Source: _wp04118 - 2.5 percent per year has been achieved with relatively modest reforms, particularly in the (PDF chapter/section).*

### References

### References

### References list

- Acemoglu, D., S. Johnson, and J. A. Robinson, 2001, "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, Vol. 91, No. 5, pp. 1369–1401.
- Bosworth, B., and S. Collins, 2003, “The Empirics of Growth: An Update,” unpublished, Brookings Institution.
- Cashin, P., and R. Sahay, 1996, "Internal Migration, Center-State Grants and Economic Growth in the States of India", IMF Staff Papers, International Monetary Fund, Vol. 43, pp. 123-71.
- Coe, D., E. Helpman, and A. Hoffmaister, 1997, “North-South R&D Spillovers,” Economic Journal, Vol. 107, pp. 134–49.
- Kelkar, V., 2004, “India: On the Growth Turnpike,” forthcoming, 2004 Narayanan Oration at Australian National University.
- Lall, R., 2003, “India Can Outperform China by ’08,” Business Standard, August 9.
- Mühleisen, M., 1997, “Improving India’s Savings Performance,” IMF Working Paper No. 97/4 (Washington: International Monetary Fund).
- Munshi, K., and M. Rosenzweig, 2003, “Traditional Institutions Meet the Modern World: Caste, Gender and Schooling Choice in a Globalizing Economy,” BREAD Working Paper No. 038 (Cambridge, Massachusetts: Bureau of Research and Economic Analysis of Development).
- Reinhart, C., K. Rogoff, and M. Savastano, 2003, “Debt Intolerance,” NBER Working Paper No. 9908 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Rodrik, D., and A. Subramanian, 2004b, “From Hindu Growth to Productivity Surge: The Mystery of the Indian Growth Transition,” National Bureau of Economic Research Paper, No. 10376.
- ——— and F. Trebbi, 2002, “Institutions Rule: The Primacy of Institutions Over Integration and Geography in Development,” NBER Working Paper No. 9305 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Shourie, A., 2003, “Before the Whining Drowns It Out, Listen to the New India,” August 15, available on the Web at http://www.indianexpress.com/full_story.php?content_id=29666
- Wilson, D., R. Purushothaman, 2003, “Dreaming with BRICs: The Path to 2050,” Goldman Sachs, Global Economics Paper No. 99.

*Source: _wp04118 - References*

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