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considered to be the trend rate of growth (Ahmad et al. 2018). After early 2018, however, the rate of economic growth declined considerably, falling below 5 per cent per annum towards the end of 2019 (The Hindu, 29 November 2019).

Table 2.1 Independent India’s Decadal Growth Rates

      SOURCE: Calculations by Joshi (2017, table 2.1)

Period	Growth rate per annum (%)	Growth rate per capita per annum (%)
1951–52 to 1959–60	3.5	1.7
1960–61 to 1969–70	4.0	1.8
1970–71 to 1979–80	3.0	0.7
1980–81 to 1989–90	5.6	3.4
1990–91 to 1999–2000	5.8	3.7
2000–01 to 2009–10	7.3	5.7
2010–11 to 2014–15	6.1	4.8
1951–52 to 1979–80	3.5	1.4
1980–81 to 2009–10	6.2	4.3

On the face of it, something must have happened around 1980–81, or just before then, to have caused the economy in India to take off. What might explain the initial acceleration in the growth rate, and then the subsequent surge in the 2000s? Is the later slowing down of the economy only a temporary blip, or might it persist? Can India maintain over twenty years or more the level of ‘super-fast’ growth (7 per cent per annum and above) that is calculated as being necessary if the country is to achieve standards of living to compare with those among even the lower ranked high-income countries today (Joshi 2017: ch. 1)? To answer these questions, we begin by asking what economic theory suggests.

      While it is clear that the supply of factors of production – capital and labour – fundamentally drives growth, it is also well established that whether or not supply materializes is a function of the demand for outputs. Both supply-side and demand-side factors matter. With regard to the supply side, however, empirical research and theorizing have also shown that growth is not explained simply by factor inputs, and that something else, a ‘residual’, is extremely important. A lot of research has been devoted to opening up the ‘residual’, and the consensus is that ‘the growth of gross domestic product (GDP) and divergences in per capita GDP will be closely tied to individual country performance with regard to productivity’ (Yusuf 2014: 55). What is referred to as Total Factor Productivity (TFP) – roughly defined as a measure of efficiency gains in the use of capital and labour – is reckoned to be crucial and to account for a more or less large share of economic growth. Its mainsprings, in turn, include technology and innovation, some of it embodied in equipment, but also organization – for the way in which industrial production, using more or less the same equipment, is organized, can make a great deal of difference to productivity. This was an important reason for the great success of Japanese companies in manufacturing automobiles. Knowledge, therefore, matters, and is now incorporated in economists’ growth models. Productivity is seen as depending on the learning and innovation systems of society that produce and determine the quality of human capital (the skills and knowledge that people bring), the capacity to generate ideas, and the ability to absorb and make use of technology.

With particular regard to India, and productivity, one of the more critical constraints that the country now faces is the lack of very basic skills in the labour force, because of the failures of the education system (discussed in detail in chapter 13). This is one of the reasons why later developers, like India, may be unable to benefit from ‘catching up’ by making use of advanced technologies developed elsewhere. India has, however, gained a great deal over the last years of the twentieth and the early years of the twenty-first century from the supply of people with high skills in regard to information technology – the fruit of early investments in higher education. Kotwal et al. (2011) conclude a survey of the economics literature on India’s growth story with the view that it reflects above all the happy coincidence of the availability of new technologies (in the IT sector) and of the skilled manpower to make use of them, thanks to India’s early investments in tertiary education (as in the now famous Indian Institutes of Technology) – though they also note that trade liberalization and opening to foreign investment, after 1991, contributed to this. Sustained growth, they argue, would not have been possible without the reforms that were initiated at that time.

      Even if the basics of it are quite straightforward, the complexity of the processes of economic growth have made theorizing extremely difficult. Given this complexity, and the dynamic nature of the processes involved, subject as they are – as we explain below – to circular and cumulative causation, there is really no substitute for the specific historical analysis of different cases. This is the conclusion reached by economists Kenny and Williams (2001) in a review of economic growth theory and of empirical analyses of growth based on large-n cross-country studies. Another economist, Yusuf, is quite downbeat, in a review of the field, about the achievements of economic growth theory. The limitations of theory and policy are indicated, he suggests, by the fact that between 1960 and 2011 only 8 out of 190 countries averaged growth rates of 7 per cent or more for two decades (Yusuf 2014).

      Pritchett and Werker, similarly, argue that ‘The principal fact about the growth rates of countries over the medium run (five to ten, to 15 years) is [their] volatility’ (2012: 7), and Pritchett and Summers (2014) have shown that episodes of very high growth are usually short-lived and end in slowing back down to the world average. These findings, showing that economic growth is usually episodic, suggest that there are distinct questions that have to be addressed in thinking about growth. What are the factors that bring about growth accelerations? What then causes growth to decelerate? In other words: what initiates higher rates of growth, and then what factors influence whether or not growth is sustained?

      Arguments about the Political Economy of Growth

In this chapter we discuss findings in the economics literature about growth episodes in the history of independent India, with a focus on the final years of the twentieth century and the first one-and-a-half decades of the twentyfirst. We will explore the proximate factors, notably the trends in savings and investment, and the ways in which they have been allocated, that have influenced the long initial period of modest growth rates, subsequent accelerations and, most recently, in the years after 2010–11, an apparent slowdown with, so far (at the time of writing in 2019), still only an uncertain recovery. But we examine, as well, the social and political determinants of these proximate factors, having in view the dynamic, recursive interactions between institutions and the pattern of economic development. The framework of economic institutions in which development takes place reflects, at a point in time, the power structure of society and the relationships between political and economic elites. What are the bargains struck between them, or, in other words, what is the character of the political

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