Growth and Crisis in India’s Political Economy from 1991 to 2013

Abstract

Since the pro-market reforms were launched, the Indian economy has grown from 4.7% in the 1990 to 9% in 2011 before slowing down dramatically to nearly half of that rate in recent years. From launching of reforms until 2011, it did manifest some vivid and impressive signs of India moving towards high growth and increase in living conditions of its population. The purpose of this article is to access the likely effects of reform measures on the society, because the mainstream approach suggests that the reforms can be expected to increase economic growth and incomes. However, this study finds that the mainstream economists ignore the role of domestic aggregate demand and inequality. India’s growth was led by the services sector, which included real estates, IT, telecommunications and banking, and contributed nearly 50% to the GDP in 2012. Manufacturing, which experienced remarkable growth and transformation in the East Asian economies, had rather grown much slower. The agriculture sector, which still employs nearly two-third of India’s workforce, remains stagnant. The study suggests that education and health have been neglected in India and this will compromise productivity and growth.