Wild or Tamed?: India’s Potential Growth
IMF Working Papers, September 1, 2007
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- Wild or Tamed?: India’s Potential Growth
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Bibliographic details
- Authors: Hiroko Oura
- Published: September 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451867886.001
Overview
- With India's GDP expanding at a rate above 8 percent in recent years, the central debate addressed is whether India is overheating—i.e., whether growth is above potential ("speed limit").
- The paper provides up-to-date projections of India's potential growth and clarifies differences in underlying assumptions used by various researchers that produce a range of estimates.
Key findings and projections
- Estimates of potential growth range from 7.4 percent to 8.1 percent for 2006/07.
- Medium-term potential growth is estimated at about 8 percent.
- The medium-term potential estimates have risks on both sides: productivity gains and investment could be volatile, but determined reforms could sustain strong productivity growth.
Analysis themes and technical focus
- Growth accounting and decomposition of sources of growth.
- Human capital, labor, productivity, and total factor productivity (TFP) as central determinants of potential growth.
- Emphasis on clarifying how differing underlying assumptions across researchers lead to the observed range of potential-growth estimates.
Risks, scenarios, and uncertainties
- Downside risks: volatility in productivity gains and investment could lower potential growth.
- Upside prospects: determined reforms could sustain strong productivity growth and support the higher end of potential estimates.
Policy implications and recommendations
- Reforms that raise and sustain productivity are critical to achieving the upper range of potential growth.
- Policies to stabilize and encourage investment are important to mitigate downside volatility in medium-term potential.