Productivity Growth in India Under Different Policy Regimes

This chapter attempted to explore the link between different policy regimes prevalent in India and productivity performance of the economy. In particular, the productivity dynamics for the period 1980–2011 – a crucial period of substantial policy changes – was examined from a policy perspective. Three different policy regimes were identified: (1) 1980–1990, a phase of piecemeal and ad hoc policy changes; (2) 1992–2000, a phase of major changes in economic policy; and (3) 2001–2011, a period of consolidation of economic reforms. The study was conducted at detailed industry level – dividing the entire economy into twenty-six subsectors – thus trying to understand the dynamics of policy effects at sectoral level. Using the India KLEMS database and a growth accounting methodology, we assessed the productivity performance of each of the individual industrial as well as broad sectors during the different policy regimes. Our analysis suggests that, indeed, the policy changes had substantial impact on productivity and economic growth in India, though it is still debatable whether the sectors that were intended to benefit from the reforms have really gained or not. The underlying data used in this study – the India KLEMS – is an important contribution to empirical research and policy-making, as it can help researchers better investigate India’s economic growth and the underlying dynamics since the 1980s.