Published in:
Economic Journal 2015 (published online: 18 APR 2015)
DOI:10.1111/ecoj.12206
Abstract:
Conventional explanations for the post-1991 growth of India's manufacturing sector focus on goods trade liberalization 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.