Economic Growth

Mudunuri Bharathi (‘Lack of Linkages’, December 8, 2007) is wrong to infer from our study that “…the sectors in the Indian economy with a sublime lack of interdependence may be performing as three unrelated engines.” Actually, our time-series econometric estimates bear out a recursive structure, with secondary sector growth being determined by tertiary sector growth and the latter being in turn determined by growth of the primary sector, with most of the sectors demonstrating an autoregressive element in addition. These were reported in a table (Table 4) titled ‘Inter-Sectoral Growth Relations’! Moreover, this pattern is consistent with the sequence of growth transitions identified by us (reported in Table 1). Admittedly, the implied story is a broad-brush account, and based on an undifferentiated model addressed to 50 years’ experience. However, the explanation of growth over half a century was not part of our twofold objective in the article. This was, to first date the growth transition in the Indian economy using an econometric procedure that excludes the influence of the researcher’s priors. Secondly, we had sought the contribution of each sector to the change in the aggregate growth rate. These objectives were chosen to provide the building blocks essential to an understanding of economic growth in India, notably the relationship of growth to the accompanying economic-policy regime. For this reason, the paper had been sub-titled ‘A Prerequisite’.We believe that we have successfully accomplished the task we had set for ourselves. Any advancement of the project of understanding economic growth in India would be welcome to us, but it is not served by the assertion that we do not describe the intersectoral linkages in the economy.

Pulapre Balakrishnan, M Parameswaran