ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Growth in India's States in the First Decade of the 21st Century: Four Facts

Growth in India's States in the First Decade of the 21st Century: Four Facts

This paper is the first attempt at examining the growth performance across Indian states during 2001-09, a period also marked by the global financial crisis. We report four key findings. First, consistent with the fact that the decade was the best one for Indian macroeconomic performance, growth increased across almost all major states in 2001-09 compared to 1993-2001. Second, nevertheless, we continue to see the phenomenon of divergence or rising inequality across states: on average the richer states in 2001 grew faster in 2001-09. Third, during the crisis years of 2008 and 2009, states with the highest growth in 2001-07 suffered the largest deceleration. Since high growing states were also the most open, it seems that openness creates dynamism and vulnerability. Finally, although the demographic dividend - a young population boosting economic dynamism - was evident before 2000, there is little evidence that there was any dividend in the 2000s. Demography alone cannot be counted on for future economic growth.

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Growth in India’s States in the First Decade of the 21st Century: Four Facts

Utsav Kumar, Arvind Subramanian

This paper is the first attempt at examining the growth performance across Indian states during 2001-09, a period also marked by the global financial crisis. We report four key findings. First, consistent with the fact that the decade was the best one for Indian macroeconomic performance, growth increased across almost all major states in 2001-09 compared to 1993-2001. Second, nevertheless, we continue to see the phenomenon of divergence or rising inequality across states: on average the richer states in 2001 grew faster in 2001-09. Third, during the crisis years of 2008 and 2009, states with the highest growth in 2001-07 suffered the largest deceleration. Since high growing states were also the most open, it seems that openness creates dynamism and vulnerability. Finally, although the demographic dividend – a young population boosting economic dynamism – was evident before 2000, there is little evidence that there was any dividend in the 2000s. Demography alone cannot be counted on for future economic growth.

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