Services Reform and Manufacturing Performance: Evidence from India

Conventional explanations for the post-1991 growth of India's manufacturing sector focus on goods trade liberalisation and industrial delicensing. We demonstrate the powerful contribution of a neglected factor: India's policy reforms in services. The link between these reforms and the prod...

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Bibliographic Details
Published in:The Economic journal (London) 2016-02, Vol.126 (590), p.1-39
Main Authors: Arnold, Jens Matthias, Javorcik, Beata, Lipscomb, Molly, Mattoo, Aaditya
Format: Article
Language:English
Subjects:
Economic growth
Economic policy
Economic reform
Manufacturing
Productivity
Service industries
Trade liberalization
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Summary:Conventional explanations for the post-1991 growth of India's manufacturing sector focus on goods trade liberalisation and industrial delicensing. We demonstrate the powerful contribution of a neglected factor: India's policy reforms in services. The link between these reforms and the productivity of manufacturing firms is examined using panel data for about 4,000 Indian firms for the period 1993–2005. We find that banking, telecommunications, insurance and transport reforms all had significant positive effects on the productivity of manufacturing firms. Services reforms benefited both foreign and locally owned manufacturing firms, but the effects on foreign firms tended to be stronger.
ISSN:0013-0133
1468-0297
DOI:10.1111/ecoj.12206