Home > Money > Budget > Budget News & Analysis FEBRUARY 27, 2002 | 14:30 IST    Feedback 

     Budget Special
Business Headlines
Corporate Headlines

 Portfolio Tracker

  My Portfolio

The Union Budget 2001-02
Economic Survey 2000-01
Exim Policy 2001-02
Credit Policy 2001-02
Railway Budget 2001-02
Budget Tutorial
Budget Process
Budget 2000-01
Budget 1999-2000

Reforms helped growth and productivity

The impact of reform, perhaps, provides the most consistent explanation for the increase in growth and productivity, an endogenous explanation for the rise in private investment, and an explanation of why the growth slowed.

First, the reforms encouraged investment by opening up opportunities for profitable investment and reducing taxes on it.

Second, rising foreign direct investment and imports of capital goods, encouraged by deregulation, suggest that not only was there an increase in new vintage capital, but that the new vintage was even more productive than usual.

Third, the reforms encouraged a shift of resources towards exports, which increases the productivity of resources.

The estimated effective rates of protection in industry suggest that primary inputs in exports are on average of 47.6 per cent more productive than in import-substituting industry.

Hence a switch of resources into exports and out of imports -- a rise in the ratio of trade to GDP such as actually occurred -- can generate substantial increases in output.

The reforms not only allowed India to take advantage of a booming export market, they led to an increase in India's share of world markets.

Powered by

The Rediff Budget Special
The Rail Budget 2002-03
The Economic Survey 2001-02
Run-Up To The Budget

   1996 - 2002 rediff.com India Limited. All Rights Reserved.