Scandinavian Working Papers in Economics
Working Paper Series,
Uppsala University, Department of Economics
No 2007:16: Is the elephant stepping on its trunk? The problem of India´s unbalanced growth
Robin Douhan () and Anders Nordberg ()
Additional contact information
Robin Douhan: The Research Institute of Industrial Economics, Postal: Box 665501, SE-102 15 Stockholm, Sweden
Anders Nordberg: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Abstract: It is often assumed that recent success in the high-technology software industry will lead India’s development. However, evidence suggests that basic manufacturing industry is stagnant. This paper proposes a mechanism that ties these two trends together. A big-push type of model, featuring linkages between firms, demand spill-over, and technology choice is elaborated. By imposing di¤erent cost structures on the manufacturing and high-technology industries the model describes outcome in terms of distribution between sectors. It is found that a policy promoting a high-technology sector can have negative effects on the manufacturing industry as well as aggregate income. A policy directing resources towards infrastructure benefits all sectors and increases aggregate income. The results from the model are found to correpond with the recent development pattern in India.
Keywords: Industrialization; India; Industrial structure
33 pages, June 1, 2007
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