Did India’s economic miracle begin in 1980? Why?

19 Nov

Two recent papers (and many previous ones) – From the Hindu Rate of Growth
to the Hindu Rate of Reform
, and From ‘Hindu Growth’ to productivity surge:
the mystery of Indian growth transition
present evidence that India’s growth accelerated starting 1979, and not – as often noted – post 1991, and go on to conjecture about possible causes for the same including – green revolution, internal liberalization etc.

Rodrik and Subramanian posit – “that the trigger for India’s economic growth was an attitudinal shift on the part of the national government in 1980 in favor of private business. The rhetoric of the reigning Congress Party until that time had been all about socialism and pro-poor policies. When Indira Gandhi returned to power in 1980, she re-aligned herself politically with the organized private sector and dropped her previous rhetoric. The national government’s attitude towards business went from being outright hostile to supportive. Indira’s switch was further reinforced, in a more explicit manner, by Rajiv Gandhi following his rise to power in 1984.”

The same point is made, albeit in a different language, by Atul Kohli, Professor of Economics at Princeton.

Evidence of Growth in GDP in the 80s –

Average decennial growth rates across countries and regions
Average decennial growth rates across countries and regions

One can easily surmise from the graph that the growth rates in the 1990s (2.5) were twice that in the 80s. However, the growth in the 80s – as compared to past 20 years was again significantly higher.

India's GDP between 1960 and 2007
India's GDP growth rates between 1960 and 2007
India's per capita GNI (PPP adjusted) between 1960 and 2007