India Since Independence: Economic Growth Analysis

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Questions and Answers

What does a higher population growth rate n imply for the steady-state capital-output ratio κ*?

It increases the steady-state capital-output ratio.

It leads to a more capital-intensive economy.

It decreases the steady-state capital-output ratio. (correct)

It does not affect the steady-state capital-output ratio.

At the steady state, what is true about the growth rate of capital g(k) relative to output g(y)?

g(k) is equal to g(y). (correct)

g(k) is always greater than g(y).

There is no relationship between g(k) and g(y).

g(k) is always less than g(y).

Which factor detracts from capital deepening in an economy?

Lower initial output per worker.

Higher population growth rate. (correct)

Increased savings rate.

Decreased technology gap.

What captures how far an economy is from its steady-state growth path?

The initial level of output per worker. Signup and view all the answers

What is κ* in the equation κ* = s / (n + g + δ)?

The steady-state capital-output ratio. Signup and view all the answers

What triggered the bold neoliberal economic reforms in India in 1991?

The currency crisis of 1991 Signup and view all the answers

Who were the key figures responsible for implementing the neoliberal reforms in India?

Narasimha Rao and Manmohan Singh Signup and view all the answers

What was the expected outcome of the economic growth pace in India post-1991?

Doubling average productivity levels every sixteen years Signup and view all the answers

What is not considered a proximate determinant of growth?

The rate of international trade Signup and view all the answers

How did India's economic growth from 1950 to 1980 compare to other economies?

It was average, indicating normal growth patterns Signup and view all the answers

What was the annual real GDP growth rate for India from 1980 to 1990?

5.9% Signup and view all the answers

What was India's annual real GDP per capita growth from 1990 to 2000?

4.4% Signup and view all the answers

Which statement about India's investment share and population growth is correct?

Both are average and not unusually poor for an economy in India's relative position Signup and view all the answers

Which of the following statements best describes the impact of the 'license raj' on Indian economic growth?

It created significant constraints on growth due to inefficiencies. Signup and view all the answers

What factor contributed to India's relatively high savings rate in the decades following World War II?

A large portion of the literate population. Signup and view all the answers

How did India's economic growth during the 1990s compare to the decades before 1980?

It was significantly faster than growth rates before 1980. Signup and view all the answers

What does the phrase 'doubling every sixteen years' refer to in the context of India's economic growth?

The pace at which Indian average productivity levels increased. Signup and view all the answers

Which of the following was NOT mentioned as an advantage that could have promoted faster growth in India?

A strong export market for goods. Signup and view all the answers

What was observed about poverty and inequality during India's growth period in the 1990s?

Poverty did not decrease as rapidly as hoped, while inequality grew. Signup and view all the answers

What does it mean for Indian GDP per capita to approach that of the United States by 2250?

The growth rate will not be sufficient to close the gap until then. Signup and view all the answers

What contrasting observation is made about India's economic growth miracle?

It suggests that absolute poverty has not decreased significantly. Signup and view all the answers

What does the estimated equation account for regarding growth rates among the studied countries?

Over 40% of the variance in growth rates from 1960 to 1992 Signup and view all the answers

Which factor is suggested to significantly influence the population growth rate?

Where the country is in the demographic transition Signup and view all the answers

How does the investment share relate to the growth in the equation discussed?

It may act as an indicator for residual factors left out of the regression. Signup and view all the answers

What was indicated about India's economic growth from independence to the late 1980s?

It lay in the middle of the scatter of world growth rates. Signup and view all the answers

What is suggested about the non-structural nature of the regression analysis discussed?

It is considered not disturbing for the analysis purpose. Signup and view all the answers

What characterized India's economic growth rate before the late 1980s?

It was considered ordinary compared to global standards. Signup and view all the answers

Which major political figure's policies contributed to the 'license raj'?

Jawaharlal Nehru Signup and view all the answers

What significant change occurred in India's economy starting in the late 1980s?

A rapid improvement in economic growth. Signup and view all the answers

Which reform is often associated with the acceleration of India's economic growth?

Neoliberal economic reforms Signup and view all the answers

What was the effect of the 'license raj' on the private sector in India?

It significantly hindered its growth. Signup and view all the answers

The doubling time for average GDP per capita in India since the late 1980s is approximately:

16 years Signup and view all the answers

Who was the Prime Minister of India when the first notable economic reforms started to be recognized?

Rajiv Gandhi Signup and view all the answers

What type of economic theory is investigated in relation to India's development?

Modern growth theory Signup and view all the answers

Study Notes

Economic Growth in Independent India

Economic growth rate of India post-independence appears average until the late 1980s, with output per worker growth in the middle of global distribution.
Proximate determinants of growth during Nehru's era included capital investment shares and population growth rates, both of which were average for India's development stage.
Nehru's Fabian socialism and central planning led to the "license raj," characterized by bureaucratic inefficiency and corruption, hindering private sector growth.

Growth Acceleration Post-1990

Since the late 1980s, India experienced rapid economic growth, with average GDP per capita doubling every sixteen years.
The growth surge is commonly attributed to neoliberal reforms initiated in the early 1990s under Prime Minister Narasimha Rao and Finance Minister Manmohan Singh.
However, evidence suggests that the growth acceleration may have begun earlier during Rajiv Gandhi’s administration.

Historical growth performance

Annual real GDP growth rates were:
- 1950-1980: 3.7%
- 1980-1990: 5.9%
- 1990-2000: 6.2%
Annual real GDP per capita growth rates were:
- 1950-1980: 1.5%
- 1980-1990: 3.8%
- 1990-2000: 4.4%

Factors Influencing Growth Prior to 1990

India’s pre-1990 growth was not extraordinary but distinctly positioned between East Asia's rapid growth and Africa's stagnation.
High savings rates observed in the early post-war decades might have offset inefficient policies.
Advantages such as a relatively literate population and a strong cultural emphasis on education provided potential for faster growth if well-managed.

Comparison with Current Growth

Current economic growth contrasts sharply with the sluggish rates observed before 1980, indicating a significant turnaround.
India's current growth has not resulted in worsening poverty levels, although inequality has increased.
The emerging growth trends suggest a sustainable economic development model, capable of matching higher productivity levels internationally.

Theoretical Insights

Modern growth theory may offer critical perspectives on India's economic history.
Proximate determinants of growth include investment share, population growth, and the existing output per worker level.
A higher population growth rate limits capital deepening; hence, balancing investment and demographic factors is crucial for robust economic growth.

Conclusion

India's economic evolution, from average pre-1990 performance to rapid growth in the 1990s, highlights significant shifts in policy and market environment.
Ongoing analysis and application of growth theory are essential for understanding the complexities of India's development narrative.

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Description

Explore the economic growth narrative of India since gaining independence. This quiz delves into key trends and metrics that define India's economic performance over the decades. Test your understanding of India's growth trajectory and its global position.