Is India Flying?
Is the current growth in India we observe represent a business cycle effect or the country has shifted to a higher growth path? I argue that it is the latter.
Without rapid expansion of the unskilled-labour-intensive industry, progress towards poverty reduction and transition to a modern economy will remain far slower than is feasible.
Abstract:
Real gross domestic product (GDP) at factor cost has grown 8.1% annually in the last three years (2003-04 to 2005-06). A key question is whether this rate represents a business cycle effect or fundamental shift in the trend growth rate.
The accompanying chart helps explain the complexity of the issue. In the first three years of the 1990s, the GDP grew 4% annually. In the following four years, the growth rate jumped to 7.1% but only to fall back to 5.2% in the succeeding five years. Underlying these fluctuations, the trend growth rate was approximately 6%.
The accompanying chart helps explain the complexity of the issue. In the first three years of the 1990s, the GDP grew 4% annually. In the following four years, the growth rate jumped to 7.1% but only to fall back to 5.2% in the succeeding five years. Underlying these fluctuations, the trend growth rate was approximately 6%.