From Hindu Rate of Growth to Productivity Surge: The Mystery of the Indian Growth Transition, (2004) by noted economists Dani Rodrik and Arvind Subramanian, delves into the dramatic transformation of India’s economic growth patterns. It provides a comprehensive analysis of how India transitioned from sluggish growth to rapid economic expansion and a productivity surge, beginning in the early 1980s, well before the country’s landmark 1991 reforms.

Rodrik and Subramanian discuss the “Hindu rate of growth,” a term used to describe India’s average annual growth rate of around 3.5 percent from the 1950s to the 1980s. This period was characterized by a highly regulated economy with significant state intervention, which stifled entrepreneurial activities and innovation.

They find that the key turning point likely occurred when the government’s stance evolved in the early 1980s. Unlike the more promarket reforms of the 1990s, this earlier shift was specifically oriented toward supporting established businesses rather than encouraging new competitors or prioritizing consumer interests. Although the policy adjustment was modest, it generated a substantial productivity increase because India’s actual income level was still well below its potential frontier. In addition, the presence of previously developed registered manufacturing sectors helped determine which states were best positioned to seize the opportunities created by this new policy environment.

Thus Rodrik and Subramanian provide a nuanced understanding of the complexities of India’s economic evolution and the factors that propelled its growth.