Indian Economic Growth : Lessons for the Emerging Economies
نویسنده
چکیده
Can we use neoclassical growth model to single out the important transmission channels through which external factors or "primitives" affected the Indian economy and caused the remarkable growth of the period 1982 to 2002? In this paper, we answer the question by applying the new technique of business cycle accounting to the Indian economy. Our results show us that the primary conduit of policies that brought about signi cant growth in India was productivity that registered an unprecedented increase particularly in the nineties. Our results further indicate that changes in labor market frictions and investment market frictions did not play a signi cant role, though increased government consumption aided growth by propping up demand. In addition, we examine the e¤ective tax rates in India and nd that while investment taxes barely uctuated, income tax rates were increasing throughout. We suspect other positive developments in the Indian economy overwhelmed the negative e¤ect of increasing labor income taxes on growth. Our result tells us that any emerging country that aims to replicate the Indian experience would do well to formulate policies that target productivity, a lesson that seems consistent with the Japanese experience since the 2nd World War. Keywords: Business cycle accounting, Indian growth, wedges, neoclassical growth, taxes JEL Classi cation : E13, E32
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