Impact of Major Liberalization on Productivity: The J-Curve Hypothesis

Type Working Paper - DEA Ministry of Finance Working Paper
Title Impact of Major Liberalization on Productivity: The J-Curve Hypothesis
Author(s)
Volume 5
Publication (Day/Month/Year) 2009
Page numbers 2009
URL http://finmin.nic.in/workingpaper/productivityjcurve09sept.pdf
Abstract
India moved from a growth rate of 3.5% per annum during the period 1950-1 to 1979-80 to
a growth rate of about 5.5% per annum thereafter because of gradual liberalization during the
1980’s. Following the BOP crisis of 1990-1991, India undertook a deep and wide ranging
liberalization of domestic and external policies. However, the growth rate barely moved from the
5.5%-5.8% range, during the 1990s [Virmani(2006a, b)].4
Many analysts pointed to this puzzle:
How could the limited reforms of the 1980s raise the growth rate of the Indian economy by 2 per
cent points, while the relatively massive reforms of the 1990s have virtually no affect on the
growth trend.

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