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A Concise Handbook of the Indian
Economy in the 21st Century
A Concise Handbook of the Indian
Economy in the 21st Century
Second Edition

Edited by
ASHIMA GOYAL

1
 1
Oxford University Press is a department of the University of Oxford.
It furthers the University’s objective of excellence in research, scholarship,
and education by publishing worldwide. Oxford is a registered trademark of
Oxford University Press in the UK and in certain other countries.

Published in India
by Oxford University Press
22 Workspace, 2nd Floor, 1/22 Asaf Ali Road, New Delhi 110 002, India

© Oxford University Press, 2019

The moral rights of the authors have been asserted.

First Edition published in 2015

Second Edition published in 2019

All rights reserved. No part of this publication may be reproduced, stored in

a retrieval system, or transmitted, in any form or by any means, without the
prior permission in writing of Oxford University Press, or as expressly permitted
by law, by licence, or under terms agreed with the appropriate reprographics
rights organization. Enquiries concerning reproduction outside the scope of the
above should be sent to the Rights Department, Oxford University Press, at the
address above.

You must not circulate this book in any other form

and you must impose this same condition on any acquirer.

ISBN-13 (print edition): 978-0-19-949646-4

ISBN-10 (print edition): 0-19-949646-3

ISBN-13 (eBook): 978-0-19909816-3

ISBN-10 (eBook): 0-19-909816-6

Typeset in Minion Pro 10.5/13.2

by Tranistics Data Technologies, New Delhi 110 044
Printed in India by Replika Press Pvt. Ltd
 Tab l es and Fig u re s

Tables
1.1 Sectoral growth since 1990s (percentage) 9
1.2 Growth rates in the total factor productivity,
sub-sectors, and services 16
1.3 Key results on the total factor productivity growth
in India 20
1.4 Growth of states relative to India’s growth 25
1.5 High growth sectors at the state level 27

2.1 Growth, inflation, and monetary policy 49

2.2 Domestic versus global factors in the economic
slowdown51
2.3 The real price of food 59

4.1 Growth in volume of government securities markets 87

4.2 Instruments and their objectives 92
4.3 Liquidity operations 95
4.4 Short-, medium-, and long-term market rates 100
4.5 Average monthly and quarterly rates 105
4.6 Granger causal results: Model I 110
4.7 Granger causal results: Model II 114
4A.1 Cholesky forecast-error variance decomposition
table: Model I 117
4A.2 Cholesky forecast-error variance decomposition
table: Model II 119
viii   tables and figures

5.1 Product structure of export and import 134

5.2 Export composition (percentage share in exports) 134
5.3 Sources of growth by major sectors (percentage change
per annum) 138

6.1 India’s merchandise trade growth rates and balance,

2001–17154
6.2 Structure of India’s exports from 2000 to 2017 156
6.3 Structure of India’s imports from 2005 to 2017 159
6.4 Changing direction of India’s trade, 1990–2016 161
6.5 Sources of India’s export growth, 2000–10 164
6.6 Services trade balance 166
6.7 Ranks of Asian countries in global services location
index167
6.8 Current account balance indicators, 2000–17 168
6.9 Indices of the real effective exchange rate (REER)
of the Indian rupee (36-Currency Bilateral Weights)
(Financial Year–Annual Average) 169
6.10 The FDI and foreign portfolio investment flows to India 171
6.11A Inward foreign direct investment flows, annual,
2005–16 (in millions USD) 175
6.11B FDI inflows as a percentage of gross fixed capital
formation, 2005–15 176
6.12 The FDI outflows from India in a global comparative
perspective, 2001–16 184

7.1A Real GDP growth, real GDP per capita growth, and
poverty in India: Track record of economic growth and
poverty reduction in India 195
7.1B Real GDP growth, real GDP per capita growth, and
poverty in India: Comparable head count ratios in
India and China 196
7.2 Gini coefficient of distribution of consumption for
select states and all India 201
7.3 Poverty estimates using traditional poverty line
methodology for select states and all India 204
 tables and figures   ix

7.4 Poverty in India and states 2004–5, 2009–10, and

2011–12 using TCR methodology 206
7.5 Tendulkar poverty head count ratios and
number of poor in 2011–12 211
7A.1 State-specific poverty lines for 2009–10 and 2011–12
(INR per capita per month) 219

8.1 Per capita SDP, CDI for SCs and disparity between
SCs and others, major Indian states 228

10.1 Structure of India’s EPZ/SEZ sector 290

10.2 Growth in SEZs: 2011–17 292
10.3 Direct employment and investment in SEZs 294
10.4 Annual growth rates of SEZ exports and national
exports: 2005–6 to 2016–17 297

11.1A Growth rate of agricultural gross domestic product 324

11.1B Year over year growth rates of gross value added by
agriculture at constant 2011/12 prices 325
11.2 Investment in agriculture 325
11.3 Growth of real government expenditure on agricultural
research, education, and extension in India
(2004/5 prices) 326
11.4 Value of output from different crops and livestock 327
11.5 Growth in area, production, and yield 328
11.6 Growth of agricultural gross state domestic product 330
11.7 Instability in net domestic produce and net state
domestic produce from agriculture using Ray’s
instability index 331
11.8 Ratio of the share of credit disbursed to the
share of area operated and the ratio of the share of
the number of borrowal accounts to the share of
the number of operational holdings 338

12.1 New sources of dynamism in the industry 356

12.2 Annual growth rate of industrial
production (percentage) (2004–5 as base year) 362
x   tables and figures

12.3 Growth rates of production of manufacturing

sub-groups (base: 2004–5=100) (percentage) 364
12.4 Share of MVA in GDP, selected years (percentage) 367
12.5 Benefits to industry from the reforms in the
financial sector 375
12.6 Growth in bank credit 379
12.7 Industry-wise mobilization of resources from
capital market (amount in INR crore) 383
12.8 Resources mobilized through the SME platform 385
12.9 Year-wise FDI and FII flows into India 388
12.10 Venture capital investment by year 389
12.11 Private placements over the years  390
12.12 Resources mobilized through qualified institutional
placements over the years 391
12.13 Trends in structured finance volumes (INR billion) 393
12.14 Top M&A deals in India in 2017 and 2018 394

13.1 Financial development index for India 404

13.2 Financial system structure in India: Bank vs. markets 406
13.3 Liquidity in Indian financial markets 416

Figures
1.1 GDP growth in India 4
1.2 Sector-wise growth rates: 5-year moving average 6
1.3 Total factor productivity index (1960–1=100) 16

4.1 Schematic representation of monetary policy operations 92

4.2 Movement in liquidity and repo rate 96
4.3 Repo and reverse repo rate and call money rate 98
4.4 Trend in mid-deposit rates and mid-lending rates 101
4.5 Trend in deposits, credit, and investments 102
4.6 Forex market operations and other domestic operations 104
4.7 Movement in CRR and money multiplier 104
 tables and figures   xi

4.8 Movements of IIP growth and yield spread 106

4.9 Impulse response function to change in repo rates:
Rate channel (Model I) 111
4.10 Impulse response function of repo rate: Quantum
channel (Model II) 114

6.1 Growth rates of India’s trade 2001–17 155

10.1 SEZ channels of industrialization and associated costs 285

10.2 Growth rates of SEZ and total exports in India over
1966–2006 in real terms 296
10.3 Share of EPZs’/SEZs’ trade balance in the total
national import bills in selected years between
1975–6 and 2010–11 (percentage) 298

11.1A Income and consumption by size-class, India (2002–3) 333

11.1B Income and consumption by size-class, India (2012–13) 334
11.2 Share of loan amount from institutional and
non-institutional sources of credit by size-class of
land possessed (2012–13) 336

12.1 Timeline of policy reforms for industry in India 359

12.2 Sources of dynamism 376
12.3 Sources of finance for industry 378
12.4 SME capital markets 385

13.1 Contagion of the 2008 global financial crisis into

India—A possible characterization 422
 introduction

the indian economy

structure, reform, and change

ashima goyal

The Indian economy has shown dynamism but also faced difficulties on
its path of transformative growth. After the liberalizing reform in the
1990s, growth rates were higher but also more volatile. The countries
that did manage to sustain a high rate of growth followed a pragmatic
reform path suited to context rather than a pure market- or government-
led approach. Since structure and context affect change, such pragmatic
reform requires a deep knowledge of the economy derived from care-
ful fact-based research. The chapters in this volume contribute to the
required knowledge on a range of issues, such as drivers of growth,
domestic compared to external reforms, macroeconomic policy coor-
dination, macroeconomic policy institutions and practices, the effect of
openness and of global economic integration, poverty and the degree of
inclusion, bottlenecks in infrastructure, and the performance of major
sectors, such as agriculture, industry, and finance. They contribute to
a finer understanding of the interaction between domestic strengths,
external opportunities, and government interventions.
Interesting paradoxes have arisen on the path, such as the domina-
tion of services in a non-standard growth pattern, high rural wage
growth combined with persistent inflation for 2007–13 despite a
large population that continued to be underemployed, and a rapid
Ashima Goyal, Introduction: The Indian Economy. In: A Concise Handbook of
the Indian Economy in the 21st Century. Second Edition. Edited by: Ashima
Goyal, Oxford University Press (2019). © Oxford University Press 2019. DOI:
10.1093/oso/9780199496464.002.0006.
xiv ashima goyal

turnaround after the global financial crisis but subsequent growth

below potential.
Despite difficulties, there are fundamental reasons for India’s
dynamism. First is the growing strength of participative democracy.
Inclusive institutions make the flexible and contextual policies neces-
sary to sustain high catch-up growth more likely. India started out
with highly inclusive political institutions since it adopted universal
suffrage at the time of Independence. But extractive economic institu-
tions, inherited from the British, were made more so by economic
controls. In addition, a heterogeneous electorate allowed politicians to
cultivate vote banks with populist schemes instead of providing good
governance and public goods.
India’s opening out was nuanced and flexible but was sometimes
used as a substitute for harder domestic reforms. It, however, added
to the growing constituencies that benefit from growth and are push-
ing for more productivity enabling inclusive institutions. Broader
interest groups create better institutions and incentives. A common
insight from a number of chapters is that obvious controls have gone,
but empowerment through genuine decentralization is still a work
in progress. Even so, the 2014 election, which delivered a decisive
mandate for good governance, shows the demand for progress to be
substantial. It ended 30 years of fragmented politics when govern-
ments used doles to appeal to different interest groups.
The second fundamental advantage is the presence of large numbers
of skilled youth, together with technological changes that give them the
opportunity for entrepreneurship and innovation. An example of this
is the active net neutrality debate of 2015. Surprisingly, many young
people spoke out, asking for net neutrality rather than accepting the
consumption subsidies being offered as an alternative, because they
favoured entrepreneurship. They wanted opportunities to create new
businesses and even to compete in international markets. In addition,
the demographic profile creates a large potential domestic market,
which is especially valuable when global conditions are uncertain.
Only a government that nourishes these trends will succeed. But the
voter is pushing in the right direction now. Facilitating opportunities
requires bettering skills and infrastructure, including Internet-related
infrastructure and its penetration; reducing the obstacles in doing
business and the transaction costs to make India one market; and
 introduction: the indian economy xv

improving the delivery of public services. To achieve all this, the com-
position of public expenditure has to be changed, legal/regulatory/tax
structures simplified, institutions modernized, and the administration
streamlined to remove overlaps. Bottlenecks in agriculture also need
to be attended to. These steps will lead to ‘active inclusion’ that will
allow more and more people to participate in growth, and this is what
the majority want today. Jobs will be created for the lower skill segment
as well, both in manufacturing and a range of services.
There are useful initiatives in some of these areas. Examples
include: the focus on infrastructure, more competitive reforms in and
freedoms to states, better financial inclusion, internet connectivity
and technology-based innovations, improvement in the ease of doing
business, more formalization, generalized sales tax implementation,
and widening of the tax base. However, the list of actions required to
be taken for sustained growth and development remains long, as our
experts (mentioned below) show us.
Laveesh Bhandari and Sumita Kale study the underlying factors
behind the acceleration in India’s economic growth and its puzzling
structure. The services sector has been the engine of growth for the
economy, with different sub-sectors taking the lead in different time
periods as each responded to a policy change, such as bank nationaliza-
tion in the 1970s, construction boom in the 2000s, et cetera. However,
industrial reforms have not resulted in sustained high growth due to
constraints in land, labour, and infrastructure. States have followed
diverse trajectories, initial conditions in each leading to differential
responses to central reforms. Growth and governance are now crucial
for electoral outcomes, making them a focal point for the path ahead.
Pulapre Balakrishnan and Ashima Goyal point to domestic factors
rather than global economy as the cause of the growth slowdown in
the last decade. It follows that more importance needs to be given
to domestic demand and difficult domestic reforms such as improve-
ments in governance. Since macroeconomic policy has impacted
growth, attention to the interaction between the two would also yield
dividends. To do so, the inflation forecast–targeting regime requires
to be flexibly implemented with supportive government action to
relieve supply-side restrictions.
Romar Correa continues to use the Godley–Cripps (1983,
Macroeconomics, Oxford: Oxford University Press) stock-flow consistent
xvi ashima goyal

(SFC) framework in this update to refine the thesis that the monetary
authority is the ‘handmaiden’ of the fiscal authority. The bank, com-
mercial and central being indistinguishable, is central to the account.
A revitalized ‘real bills doctrine’ is proposed. The deleterious conse-
quences of promoting the alternative—‘financialization’—are traced.
K. Kanagasabapathy, Rekha A. Bhangaonkar, and Shruti Pandey
address the issue of whether the rate and quantum channels were
complementary to each other between April 2001 to December 2017.
Reserve Bank of India’s (RBI’s) monetary policy framework is
characterized by the use of multiple instruments combining adjust-
ments in the policy rate, with a complex use of liquidity manage-
ment operations despite changes in the functioning of the monetary
policy. They study easing and tightening phases of the policy cycle
and bring out stylized facts on several relationships, highlighting
the impact of policy rate changes and liquidity conditions on short-
and medium-term market interest rates, and output and prices. An
empirical analysis confirmed the linkage between the repo rate and
the market-related rates. On the quantum side, a bi-causal relation-
ship is observed between repo and liquidity. Transmission to money
and financial markets is established better than that to the real sector.
Shruti Pandey and K. Kanagasabapathy have worked on the revised
version for the new edition.
Soumyen Sikdar attempts to understand the contribution of external
liberalization to post-reform growth performance. Current account
openness has reduced the cost of importing intermediate inputs
and technical knowledge. The services sector, helped by the telecom
revolution, has efficiently exploited the burgeoning global demand
for business process services. The demand–pull effect has been much
weaker for manufacturing due to persistent domestic inefficiency and
serious infrastructural deficiencies, in addition to competition from
China. Agriculture also continues to be hamstrung by supply-side
constraints, in which decline in public investment has played a crucial
role. There is a movement up the value ladder in exports, and import
composition too has changed for the better, though much scope for
improvement still remains. There is evidence of total factor produc-
tivity growth, particularly in services. But foreign direct investment
(FDI) has failed to effect any major supply-side change, and foreign
portfolio investment (FPI) has failed to bring down the cost of capital
 introduction: the indian economy xvii

significantly or to stimulate stock markets adequately. The need to

counter exchange rate volatility, due to global risk-driven volatility
in the FPI, forced the RBI to take measures that impacted growth
adversely. These risks are continuing as we wait for monetary policy
to normalize in the major countries. A fact that greatly redounds to
the credit of our regulatory framework is that despite its considerable
openness, the Indian economy could escape the global financial crisis
of 2008 relatively unscathed due to quick and appropriate policy
response on many fronts.
Nagesh Kumar brings out how the reforms pursued since 1991
have deepened the global integration of the Indian economy in terms
of a rising share of trade and an even more dramatic transformation
of services trade, as well as the emergence of the country as one of
the most attractive destinations for and an important source of the
FDI flows. Analysis shows, however, that opportunities for product
and market diversification remain to be fully exploited to sustain
export growth and create more jobs, especially as the anaemic growth
of world trade becomes a new normal in the aftermath of the global
financial crisis. Despite healthy trade surpluses earned by services as
India emerged to be a global hub for the information and communi-
cations technology (ICT) outsourcing, the balance of payments situa-
tion continues to face occasional pressures related to fluctuations in
oil prices. Export competitiveness needs to be strengthened through
appropriate exchange rate management, and opportunities for strate-
gic import substitution need to be exploited by leveraging India’s large
domestic market size using industrial policy measures. The revival
of manufacturing under the ‘Make in India’ initiative will not only
make the current account situation more sustainable but will also
create jobs for India’s youthful population. While far-sighted policies
have led India to become a part of the emerging broader regional
economic arrangement, Indian industry has yet to learn to exploit
the opportunities provided by preferential access to the East Asian
markets rather than passively grant market access.
Raghabendra Jha and Anurag Sharma point out that despite 20
years of accelerated growth, the persistence of mass poverty, perceived
rising inequality, and their spatial variation cause disquiet. The accu-
racy of yardsticks that show improvement is questioned. Adequacy
of nutrition, the traditional rationale for the poverty line, has not
xviii ashima goyal

recorded impressive gains. The best means of lowering poverty, which

reforms have not achieved, is to create mass-scale jobs for poor and
unskilled workers. The chapter advances suggestions for this and for
better targeting of anti-poverty interventions. Aadhar-based direct
benefit transfers and attempts to expand low-skilled manufacturing
in India are therefore hopeful signs.
Ashwini Deshpande argues that the translation and impact of
momentous post-reform changes on inter-group disparities has been
uneven. Caste inequality shows very strong inter-state variation and
some convergence, but no clear relationship between growth and con-
vergence. Gender wage gaps are substantial, despite the reduction in
the average gender wage gap for regular wage and salaried employees
over the last decade, and these are greater for the lower part of the
wage distribution. A decomposition of these gaps between ‘explained’
and ‘residual’ indicates that the discriminatory component is greater
among the bottom four wage deciles, implying the presence of a ‘sticky
floor’ rather than a ‘glass ceiling’ for women. While poverty incidence
has reduced, class inequality has increased sharply, which has fuelled
a protracted armed insurgency in large parts of the country.
S. Sriraman attempts to understand the impact of the governance
structure in the Indian context on the provision of transport infra-
structure and services. Government-owned railways have taken some
initiatives to promote freight movement in a big way through the
establishment of dedicated corridors with a different model of invest-
ment and operation. Equally significant are the initiatives taken by
different transport-related ministries to promote multi-modalism,
which involves a change in the governance structure. The issue is
whether there can be effective implementation of these policy ini-
tiatives given the continuing poor practices and deviation from an
ideal institutional governance framework. One other issue discussed
critically relates to the effective implementation of the planning and
operating of information technology practices in the context of smart
cities that are being encouraged against the background of poor urban
physical infrastructure.
Aradhna Aggarwal, in examining the formation and evolution
of the special economic zone (SEZ) policy and its contribution to
Indian industrialization over different phases, draws lessons for
new policies. Contextual solutions require experimentation, but
 introduction: the indian economy xix

continuity of government support over the political cycles is also

essential. Commercial sustainability with some legal backing may be
the way for policy consistency, making special initiatives independent
of the government. To the extent special concessions are given, some
sunset clause, or else use of competition and appropriate regulation
to prevent rent-seeking, would be required. Tax concessions could
be reduced as other constraints ease. A report by the Comptroller
and Auditor General of India (CAG) that highlighted the large tax
losses and the large percentage of unutilized land in SEZs points to the
necessity of both proper design and implementation. But a blind anti-
industry position is counterproductive when employment generation
is the way to reduce poverty. Strategic vision and dynamic learning
must combine with a political will to implement.
S. Mahendra Dev, Srijit Mishra, and Vijay Laxmi Pandey contex-
tualize Indian agriculture by an evaluation of its performance, with
a focus on the roles, challenges and opportunities for smallholders.
They observe a turn-around over 2004/5–2010/11 compared to the
immediate post-reforms period, which had witnessed stagnation
in comparison to the pre-reforms period. Public policy initiatives
on investment, research, extension and credit, and a set of good
monsoons were among the reasons for improvement. But livelihood
sustainability of smallholder farmers is a matter of concern. Even so,
there are opportunities to reduce costs and risks, and use low external
input sustainable agriculture without compromising on production.
There were sharp peaks in agricultural prices that contributed to infla-
tion. But after these prices moderated with the export prices, there
was a severe small-farmer distress. The supply response has to keep
up with the demand growth without excessive inflation, even as the
population dependent on agriculture shrinks.
Bandi Ram Prasad places the canvas of Indian industry in rela-
tion to the financial sector. Reforms gave the much needed impetus
to industries with opportunities to pursue growth, diversification,
and global expansion even as policy support, changing dynamics of
global manufacturing, and financial reforms emerged as new sources
of dynamism. The rapid expansion of India’s financial sector in terms
of the reach of institutions, products, and domestic and foreign
financial flows have had a significant impact on the financing of
the Indian industry—from the corporate sector in the conventional
xx ashima goyal

economy to the new infrastructure projects to start-ups—though

concerns continue to exist in terms of inadequate financial flows to
small businesses and small and medium-sized enterprises (SMEs)
that have greater potential for employment generation in the context
of bank non-performing assets (NPAs). The focus on finance raises
interesting issues, such as risks from volatilities arising from global
geopolitics and the scope for domestic policy to evolve alternatives to
ensure sustained financial flows to the industry.
Rajesh Chakrabarti gives an overview of the financial sector in
India. For him, a financial system is akin to the circulatory system
in the human body, tapping and transporting savings throughout the
economy, with markets and banks being the two competing and com-
plementary arteries. The Indian financial system ranks slightly below
the median in the World Economic Forum rankings, but has virtually
re-booted since the still-ongoing liberalization that started in 1991.
The four pillars of a financial system—laws, technology, creditors’
rights, and corporate governance—have all undergone and are still
undergoing major transformations. Financial access and inclusion
remain key challenges despite serious efforts and experimentation.
The banking system is stable, public-sector dominated, fragmented,
and heavily regulated. Financial markets have witnessed a sea-change
but still have limited liquidity. The corporate bond market—key for
the much-needed infrastructure financing—remains seriously under-
developed. The regulatory system is fragmented, rule-based, and—
generally speaking—quite conservative. Globalization of the financial
system has been steadily increasing with time and while not the most
innovation-friendly in the world, it has succeeded in providing stabil-
ity and averting crises in an increasingly turbulent global financial
environment. Aadhaar and big data–based fintech has the potential
for inclusive innovations. The chapter’s focus on the institutional and
legal base brings out the deep-seated transformational changes tak-
ing place, which perhaps need more time to be fruitful in increasing
domestic savings, allocating them better while reducing the cost of
credit, improving its availability, and encouraging entrepreneurship.
 chapter 1

sou rces of
grow th in in dia

laveesh bhandari and sumita kale

Economic growth in India has been accelerating steadily since

the 1970s; yet, most agree that the reforms in 1991 and after have
taken the growth path to another level. India has since left far
behind the ‘Hindu rate of growth’, and with growth spread across
all parts of the country, laggard states are well on their way to
discard the other highly demotivating term ‘bimaru’ (or sickly
states in north India). Growth has been sustained, has not been
limited to urban India, and some argue that economic growth in
rural India continues to lead economic growth, even though agri-
culture now accounts for a small share of the economy. Sectorally
as well, growth has been quite well-spread; take, for instance,
agriculture—while the overall agricultural growth has been
far lower than that in other sectors and centered around 2.8 to
3 per cent in the 1990s and 2000s, there are states such as Gujarat
and Nagaland that have shown double-digit growth in agriculture
for close to a decade. Further, sectors such as transportation, com-
munications, and logistics were not the only ones that saw double-
digit growth in the last decade, and were accompanied by strong
and sustained growth in other sectors as well, such as construction
and finance.

Laveesh Bhandari and Sumita Kale, Sources of Growth in India. In: A Concise
Handbook of the Indian Economy in the 21st Century. Second Edition. Edited by:
Ashima Goyal, Oxford University Press (2019). © Oxford University Press 2019.
DOI: 10.1093/oso/9780199496464.003.0001.
2   laveesh bhandari and sumita kale

Since the 1980s, India has seen two significant changes, which are
arguably closely connected. The first is what has been generally termed
as economic policy reforms that have led to a significant change in the
way the state deals with economic activity. The second is a significant
change in technologies being used both inside and outside the coun-
try. High growth, therefore, has spread far and wide (though by no
means smoothly). Where did this high growth come from? Which
sectors led the changed trajectory?
The answer is not easy to decipher, as the reforms have themselves
been quite staggered and uncoordinated.1 Implementation of announced
policy changes has many a times been delayed and has sometimes been
quite ineffective. On top of that, the underlying data collection mecha-
nisms have remained poor. The net result is that it is very difficult to
adequately decipher how reforms impacted India at a microeconomic
level. This is not to say that studies have not been attempted. In other
words, while the evidence on aggregate economic growth having
improved is unambiguous, the data to pinpoint the sources of that growth
and acceleration are not as unambiguous as is shown in this chapter. To
confound matters, the latest gross domestic product (GDP) series with
base year 2011–12 has significant methodological differences with the
previous series, making trend analysis inappropriate across time. This
has, arguably, also severely impacted studies on growth and productivity
changes and how they are evolving. Consequently, the data analysis in
this monograph also suffers from that weakness.
This chapter proceeds as follows. ‘Economic growth since
Independence’ provides a base for later sections by first looking into
the aggregate growth figures in the post-Independence period, with
special emphasis on the period since 1991. ‘Economic Reforms and
Economic Growth’ reviews studies that have attempted to link the
reforms with growth. ‘Productivity and Growth’ delves into issues
of productivity growth and the total factor productivity growth
(TFPG). ‘Inter-State Differences’ looks at inter-state differences
and whether states are converging and why. ‘Reforms towards

1 The process of reforms has not been smooth, rather it has been stop and go,
thanks to inter-departmental and inter-ministerial differences and differences
between states, between states and the Centre, as well as between successive
political denominations that have ruled at the Centre and the state.
 sources of growth in india   3

Formalization and Digitization’ looks at the economy post 2011,

while the last section gives a conclusion.

Economic Growth
since Independence

The Central Statistical Office (CSO) of the Ministry of Statistics and

Programme Implementation has been releasing annual National
Accounts Statistics, which contain key economic variables, such as the
GDP. The bulk of the studies on growth uses these GDP figures from
the CSO. The base year changes every few years, though recent prac-
tices have been to change them every five years. In other words, the
GDP figures are estimated in detail every five years, in line with the
large sample quinquennial employment and expenditure survey of
the NSSO; and the intervening years involve an updation to the GDP,
which requires lesser data inputs. Every time the base year changes,
the CSO publishes a document on the latest methods of estimating
and updating the GDP.2 A detailed examination of this document
reveals—(a) the government is very well aware of the possible limi-
tations of the underlying data sources and aims to circumvent most
pitfalls; and (b) the GDP in India is probably underestimated, and
this downward error is arising out of the government’s inability to
capture the value added in the informal sector. Since the methods of
data collection have, so far, been more or less standard and consistent
over time, the underlying data, though somewhat flawed, are good
enough for most studies on growth, especially in the absence of alter-
natives. The situation has, however, changed with the latest national
accounts series with 2011–12 base-growth estimates; they are now not
strictly comparable with the previous datasets.3 Further, as the CSO

2 The methodology for the 2004–5 base year series is available in CSO (2010).
3 For full details on the changes in methodology, see CSO, June 2015, ‘Changes
in Methodology and Data Sources in the New Series of National Accounts, Base
Year 2011–12’. Available at: http://www.epwrfits.in/Changes_in_Methodology_
NS_2011_12_percent20June_2015.pdf. Last accessed on 18 January 2018.
4   laveesh bhandari and sumita kale

has not yet released a back series for years prior to 2011–12, the cur-
rent estimates are too few and still under revision. This constrains the
possibility of trend analysis for the most recent years. Consequently,
in this updated study, while the growth estimates post 2011–12 are
presented, they must be seen with appropriate caveats in place.
Looking at the years before 2011–12, while growth rates have
shown an increasing trend, the volatility in the annual growth rates
has reduced significantly as well, as Figure 1.1 shows. Arguably, this
is a result of the diversification in the economic activity caused by
the reforms. Figure 1.1 reveals a simple story. Growth has varied
tremendously year to year since the 1970s. Depending upon how
one estimates growth and determines the periods and sub-periods,
it is possible to get somewhat different results. And some of the dif-
ferences in interpretation we find in the literature are indeed due
to differences in the time periods being covered. Figure 1.1 shows:
(a) growth has been on an increasing path over the last few decades,
(b) the improvements in growth not only precede the 1990s but also

12%
10%
8%
6%
4%
2%
0%
−2%
−4%
−6%
1951–2
1954–5
1957–8
1960–1
1963–4
1966–7
1969–70
1972–3
1975–6
1978–9
1981–2
1984–5
1987–8
1990–1
1993–4
1996–7
1999–2000
2002–3
2005–6
2008–9
2011–12
2014–15
2017–18

GDP Growth 5 Year Moving Average

GVA Basic Prices 2nd Order Polynomial Trendline

figure 1.1 GDP growth in India

Source: Author’s estimations from the CSO data.
 sources of growth in india   5

the 1980s, and arguably go back to the latter half of the 1970s, and
(c) the current slowdown may very well be a temporary component of
a long term political economic cycle. Each of these elements is taken
up in later sections. As explained previously, while the growth rates
for the gross value added (GVA) at basic prices for the latest 2011–12
series have been marked in Figure 1.1, it is not appropriate to compare
these growth estimates for 2011–12 to 2017–18 with the earlier trend,
as the new series differs significantly from the earlier series.

The Sectoral Picture: Pre-1991

Following the low growth phase in the 1960s and first half of the
1970s, the high growth phase of the 1980s was not limited to a single
sector, but all three—agriculture, industry, and services—achieved a
higher growth plane.
Consider first agriculture and allied activities, which registered
an average growth of 3.1 per cent in the 1980s, following the low
1.8 per cent annual average seen in the 1970s. This, it is well known,
occurred as the Green Revolution took hold in Punjab and spread
across Haryana and western Uttar Pradesh. Other states also started
to benefit from the increased availability of fertilizers and better seeds,
though maybe not to the same extent as north-western India. (See, for
instance, Swaminathan 2010.)
Registered manufacturing and electricity were the focus of the
early years in planning, but the dividends soon ran out as con-
trols stifled growth. Industry, therefore, suffered a sharp decline
through two decades after seeing high growth in the 1950s. The
Janata Party in the latter part of the 1970s, the first non-Congress
government at the Centre, did not do much apart from extending
some support to the small-scale sector.4 Devaluation in the late
1960s was followed by a steady depreciation in the first half of the
1970s (the latter not by design but because the rupee was tied to
the depreciating sterling). Though it is not clear whether it was

4 It accorded greater protection to small industry by increasing the list of

reserved items to 504 in April 1978; it also increased the small-scale industries
(SSI) limit from INR 10 lakh to INR 30 lakh capital investment.
6   laveesh bhandari and sumita kale

12%

10%

8%

6%

4%

2%

0%

−2%

1999–2000
1951–2
1953–4
1955–6
1957–8
1959–60
1961–2
1963–4
1965–6
1967–8
1969–70
1971–2
1973–4
1975–6
1977–8
1979–80
1981–2
1983–4
1985–6
1987–8
1989–90
1991–2
1993–4
1995–6
1997–8

2001–2
2003–4
2005–6
2007–8
2009–10
2011–12
Agriculture & Allied Activities Industry Services (Including Construction)

figure 1.2 Sector-wise growth rates: 5-year moving average

Source: Author’s estimates from the CSO data.

support to the small-scale industries (SSI) and other interventions

or the reducing relative value of the rupee, but manufacturing did
grow, backed by a steady increase in exports (see Mohan (2006)
and Panagriya (2008), for instance).
The services sector has, for a long time, led the Indian economy
in terms of size. But it was by no means the growth engine of the
Indian economy as it grew roughly at the same rate as manufacturing.
The major change occurred in the 1970s with the nationalization of
banks. Command and controls did contribute to the spread of the
banking system and the consequent growth in the financial sector.
On the other hand, other sectors such as construction, trade, telecom,
business services, Information Technology (IT), and others did not
benefit significantly from any of the technology changes that were
occurring in their domains at the time, as the sectors remained pro-
tected. The 1980s saw, for the first time, government recognition and
limited support to the IT and communications sectors. But this delay
in the entry of new communications and the IT technologies would
also have been partly responsible for the delay in the commencement
of the high growth phase in the post-reforms period.
 sources of growth in india   7

Post-1991 Growth
Over 1991–2011, the economy grew at an annual average rate of 6.8
per cent. Though significantly higher than the period before, the
aggregate figure hides some important aspects. The GDP grew at a
little over 6 per cent in the 1990s, but accelerated to slightly over
7 per cent in the first half of the 2000s and then further to a little
over 8 per cent for 2006–12. The post reform churn very quickly
corrected itself and the economy appeared to be on a high-growth
path by the middle of 1990s, but the acceleration in growth was
hit in the second half of the 1990s. There were a number of fac-
tors contributing to this: Asian crisis, post-nuclear test sanctions,
stalling of reforms after 1995, and rising fiscal deficits from 1996
(see Acharya 2002 for a detailed exposition of these factors). The
NDA (National Democratic Alliance) years saw an improvement
in growth despite some of the worst agricultural years and a
tightening of the fisc. The major sectors that were leading India’s
march towards a high growth economy in the early 2000s were
(a) construction, (b) transport, storage and communications, and
(c) financial and business services which also include the IT. Each
of these was preceded by some important institutional develop-
ment. The communications sector gained from the more open poli-
cies of the government and the actions of an independent regulator
in the form of the Telecom Regulatory Authority of India (TRAI).
Together, they succeeded in creating an environment that enabled
free and fair competition, consumer interest was considered fore-
most, and both entry and exit were allowed while keeping govern-
ment intervention to a minimum. The construction sector growth
was boosted by housing and highway construction, an outcome of
lower interest rates, income tax incentives, more disposable income,
and government investment in roads under Pradhan Mantri Gram
Sadak Yojana (PMGSY) and the Golden Quadrilateral Programme,
among others.
Developments in financial markets in the mid- and later-1990s
included the entry and strengthening of two major institutions.
First, an independent regulator in the form of Securities and
Exchange Board of India (SEBI) had overcome its teething trou-
bles. Second, perhaps as importantly, new trading technologies
8   laveesh bhandari and sumita kale

introduced by the National Stock Exchange (NSE) created a

transparent system of trade; moreover, the spread of the electronic
communications technologies also had its secondary impact on
the financial sector (ATMs and offsite trading terminals being just
two examples).
The 1990s finally saw the IT sector come into its own, both as an
exporter5 and as an employment generator.6 If there is one institu-
tional element that can be identified as synchronous with growth
in the IT sector, it would be the efforts of the NASSCOM. The
association is a textbook example of how cooperative lobbying by a
highly competitive sector can help in creating and sustaining a far
more enabling environment than unilateral action. Some important
government decisions pertinent to the IT sector included low tariff
on imports of the IT hardware, greater depreciation of hardware
and software and ensured, at the same time, that the industry built
for itself a set of quality standards that were in sync with those oper-
ating internationally.7
A comparison of the overall growth rate and that in manufacturing
shows that apart from the first post-1991 period, the manufacturing
sector has not been able to significantly pull up aggregate growth
in India. This has remained one of the most curious aspects of the
reforms and their impact. The first and the deepest set of reforms—
industrial delicensing and relaxation in bottlenecks to international
and domestic investment, as well as in international and domestic
trade occurred specifically for releasing the manufacturing sector
from the stranglehold of government intervention. But the manu-
facturing sector growth could not take off. Popular discourse has

5 Total export revenues earned by this sector have grown from INR 6,723 crore
(USD 1.8 billion) in 1997–8 to INR 104,500 crore (USD 23.6 billion) in 2005–6,
according to the Eleventh Plan Working Group on Information Technology,
Planning Commission.
6
Number of IT professionals in India increased from barely 50,000 in 1990–1
to about 1.045 million in 2004–5. See Singh (2006).
7 For more details, refer to Ministry of Information and Technology,

http://www.mit.gov.in/content/schemes-and-policies-electronic-hardware
and  http://www.mit.gov.in/content/export-promotion-schemes-dpl-elec.  Last
accessed on 12 June 2019.
Table 1.1 Sectoral growth since 1990s (percentage)
Sectors 1991–6 1996–2001 2001–6 2006–11 Sectors 2011–12 Series 2011–18
Agriculture, forestry, and fishing 3.6 2.1 2.3 2.9 Agriculture, forestry, and fishing 2.4
Mining and quarrying 4.5 4.5 5.1 4.3 Mining and quarrying 6.3
Manufacturing 9.5 4.0 7.5 7.7 Manufacturing 7.6
Electricity, gas, and water supply 7.8 5.7 6.1 5.5 Electricity, gas, water supply, and other utility 5.8
Construction 3.7 7.7 12.8 7.5 Construction 3.1
Trade, hotels, and restaurants 9.3 7.1 9.1 7.8 Trade, hotels, transport, 8.7
Transport, storage, and 7.7 11.5 12.9 13.1 communications, and services
communication related to broadcasting
Financing, insurance, real estate, 7.2 8.2 8.4 10.9 Financial, real estate, and professional 9.5
and business services services
Public administration, community, 4.7 9.6 5.3 9.6 Public administration, defence, and other 7.3
social, and personal services services
GDP 6.2 6.0 7.2 8.1 GVA at basic price 6.8
Source: Authors’ estimates using data from CSO, Ministry of Statistics and Programme Implementation, GOI. Data for 2011–18 is based on
GVA at basic prices (2011–12 series) and is not strictly comparable with the previous periods; data for 2014–15 are Third Revised Estimates,
for 2015–16 are Second Revised Estimates, for 2016–17 are First Revised Estimates, and for 2017–18 are First Advance Estimates.
10   laveesh bhandari and sumita kale

identified labour laws, inspector raj,8 or lack of foreign direct invest-

ment (FDI),9 among others, as the institutional constraints that have
added to the costs and, therefore, inhibited manufacturing growth.
At the same time, we find that none of these have been able to stifle
growth in selected sectors—the automobile manufacturing sector
being one example. Over the entire period, the lagging sectors were
predictably forestry and logging, agriculture including livestock, and
mining and quarrying. Since the Green Revolution, the agriculture
sector has not received significant investment or policy focus; this
shows up in the declining agricultural productivity, which is dis-
cussed later in this chapter.
This section has briefly sketched out the shifting trajectory in
growth and also alluded to some institutional developments that
preceded high growth phases. The next few sections delve into the
determinants behind this growth to understand the impact of reforms,
productivity, and political economy on overall growth and, by exten-
sion, to the sectors that have registered stellar performances. But that
is best achieved by first looking into the received wisdom on reforms
and how they impacted growth.

Economic Reforms
and Growth

Reforms—in short, the changes that work towards amending and

improving a system—are an ongoing process in any economy. There
are various facets of reforms and this section reviews studies that have
attempted to link the process of reforms to growth in the Indian economy.

8 ‘World Economic Forum’s Global Competitiveness Report 2003–4 ranked

India at the fifth place out of the 102 countries on the parameter of burden of
regulatory inspection. The World Bank’s ‘Investment Climate Survey’ in 2004
estimated that on an average, 11.9 per cent of senior management’s time in India
was spent in dealing with government agencies. See GOI (2005).
9
For a review of the FDI policy path in India and the changing definitions and
lack of FDI in the infrastructure sector, see Singh K. (2006).
 sources of growth in india   11

When did the growth turnaround begin? We have shown in the

previous section that an argument could be made for the latter half
of the 1970s. But that is an argument that is rarely made in literature.
Deepak Nayyar (2006) makes the point that during the past century,
1951 was the turning point for India’s growth performance and since
Independence, it was 1980 that framed the break point with a growth
surge. While the 1980s saw a definite surge in the growth trajec-
tory, studies have not been able to pin the shift down to a particular
year.10 Virmani (2005), for instance, documents the growth phases
and contentious debates over the break points in these phases and
notes that most studies have pinned the change in growth trajectory
to the 1990s, while his earlier papers in 1989 and 1997 showed that
growth acceleration predated the new economic policy launched in
1991. Further, his analysis for 1950–2002 shows no break point other
than 1980–1, showing that the turnaround effectively happened in
the 1980s.11
What part did reforms play in the higher growth in the 1980s?
Even a cursory look at Figure 1.1 shows that it is possible to create
many different stories depending upon the periods where growth
rates are aggregated.12 Each of those stories need not be incorrect,
but are rarely indicative of the larger picture. For instance, it would
be difficult to disagree with Panagariya (2004) that the high growth
in 1988–91 pushed the average growth for the 1980s upwards and
the variance of growth in the 1980s was much higher than that in the
1990s. While relaxation of controls was ongoing since the 1970s, the
pace of reforms actually picked up in 1985, especially over 1985–8.
These were important reforms and covered exports, industrial licens-
ing and production (Monopolistic and Restrictive Trade Practices
[MRTP], cement and aluminium), tax (modified value added tax

10
See Wallack (2003) for the shift in cut-off year, depending on which series of
national income was taken.
11
See also J. Bradford DeLong (2004).
12 A recent paper by Dholakia and Sapre (2011) finds that the detection of break

dates is sensitive to base year changes, marginal extension of time series, and
alteration of the length of the partition. The paper concludes that due to empirical
limitations, there is no conclusive evidence of break dates and hence cannot help
settle the debates over different growth and policy regimes of the Indian economy.
12   laveesh bhandari and sumita kale

[MODVAT]), and management of the real exchange rate.13 These

‘dipstick reforms’ of the 1980s were indeed the precursor for the far
deeper changes of the 1990s, as they yielded important insights on
growth outcomes.
The consequent impact on trade and manufacturing showed
immediately in the second half of the 1980s. Apart from the usual
greater business orientation type of arguments, Virmani (2005) points
to the importance of credibility. He argues that the credibility of intent
of policy change was firm. This was critical in achieving a high rate
of growth of private investment. This observation is substantiated
through the rise in the annual growth rate of the gross fixed capital
formation (GFCF) in the 1980s to 6.9 per cent as compared to 4.8 per
cent in the previous two decades and higher growth for manufactur-
ing. There is also a view that the key reason behind this increase in
growth and reduction in volatility was a shift in the political economy
towards a more pro-business policy stance (see, for instance, Rodrik
and Subramanian 2004).
We, however, find it difficult to classify reforms as pro- or
anti-business. On the one hand, the overall economic freedom
has increased and entry and exit is easier. Independent regulatory
entities have been set up and are functioning relatively well. On the
other, as many reforms have arguably created greater discretion
in the hands of a few, there is some cause to believe that corrupt
practices have increased, and there is little evidence of increase in
small business activity.
What went wrong in the reforms–growth equation of the 1980s?
Despite the growth surge, the very nature of the reforms of the 1980s
has in fact been attributed as the determinant of the 1991 crisis faced
by the Indian economy. As argued by Joshi and Little (1994), the
expansion of government expenditures was considerable, with the
bulk of this expenditure being on defence, interest payments, and
subsidies. Growth in the 1980s was primarily due to unsustainable
increases in public expenditures and excessive foreign borrowing
that finally ended in the balance of payments crisis of 1991, when the

13Joshi and Little (1994) note that the exchange rate policy became more active
from 1985, ‘though the fiction of a fixed basket peg was maintained’.
 sources of growth in india   13

international environment soured. It was because of this that though

Bhagwati (1998) accepted the higher rate of growth in the 1980s, he
did not consider it a new phase in India’s development. Therefore,
though the higher rate of growth is accepted by all studies, this was
not considered healthy growth, as the reforms were lopsided and cre-
ated more problems than they set out to resolve.
What went right in the reforms–growth equation of the 1980s?
Ahluwalia (1994) identifies the changes in the 1980s as ‘the result
of a process of evolutionary reform’. More importantly, he correctly
identifies the changes as ‘marginal rather than fundamental’. This was
why we term these as ‘dipstick reforms’ for there was no ‘comprehen-
sive shift away from a regime of controls’, but they went a long way
to make further reforms palatable to a democracy that had grown
up with socialism as the dominant paradigm. But there is another
argument—Panagriya(2004) argues that it is difficult to perceive
any such change in attitude within the government or bureaucrats
and quotes some personal instances and communications to under-
score the arguments. We believe that this was all a part of the same
picture—massive reforms of the 1990s required political support and
the dipstick reforms were an important element in achieving that
political consensus.
What changed in the 1990s and later in the reforms–growth equa-
tion? The key difference from the previous decade was that now the
reforms were systemic, coordinated across ministries, and received
strong political support. The first and most important set of reforms
unarguably occurred in the Ministry of Industry—delicensing and
removal of controls on investment being the two most critical changes.
Though, as shown earlier, these reforms did not translate into stronger
manufacturing growth immediately, they signalled a major change in
the policy mindset from the previous decades, as they were accom-
panied by sustained changes in the Ministry of Commerce with an
easing of import barriers and the rupee was also devalued in tandem
by the Ministry of Finance.
Whatever the reasoning and analysis, it is indisputable that
reforms had set in by the 1990s. The next section explores the
mechanism through which the reforms impacted growth—by raising
productivity.
14   laveesh bhandari and sumita kale

Productivity and Growth

Growth in output can stem in a natural way through increase in

factor inputs of labour and capital, or through improvements in the
efficiency of these inputs; for example, a unit of labour produces
more output than before. Reforms would work on growth in output
by raising efficiency, by raising the total factor productivity (TFP);
Dholakia (2001) shows that the post-1985 growth acceleration is, to
a very large extent, due to improvements in the efficiency of factor
use, or the TFP: over 1960–85, the growth of total factor productivity
contributed less than 22 per cent of the overall growth rate, while the
TFP growth accounted for 48 per cent of the overall GDP growth
during 1985–2000.
Bosworth et al. (2007) worked on deciphering the link between
growth acceleration and the TFPG in finer detail. The analysis
was conducted over a four-decade period divided into smaller
sub-periods:14 1960–73, 1973–83, 1983–93, 1993–9, and 1999–04.
They found that over 1960–73, nearly all the output growth can be
attributed to growth in factor inputs, with nearly two-thirds accounted
for by increased employment, and a third by increases in capital per
worker. A little over half the small acceleration in growth seen over
1973–83 is attributed to the TFPG and the remainder is associated
with increased labour inputs or employment. During this period, the
determinants of the TFPG are the Green Revolution increasing the
agricultural TFP and sectoral reallocation of employment towards
other sectors. A marginal rise in output growth in 1983–93 over the
previous decade’s performance can be completely attributed to the
increased TFP, but this time the gains are concentrated in services
and industry (especially manufacturing). Therefore, with growth
associated with the TFPG, reforms are linked directly to the TFPG
in this period.
The period 1993–9 saw annual growth at 7 per cent levels. This was
a short period where the impact of reforms of 1991 and thereafter

14
The breakpoints have been chosen in line with data availability from various
NSSO survey rounds.
 sources of growth in india   15

had not fully played out. There was a decline in employment, along
with a particularly large jump in labour productivity, mainly in the
services sector but which was also evident in other sectors.15 The
most recent period in their analysis, 1999–2004, saw slower growth
in all sectors, with the TFP and capital deepening slowing in both
services and industry.
Both popular discourse and the authors have identified the slow-
down in the early years of the NDA regime due to (a) international
conditions and (b) poor monsoons during the period. Bosworth et al.
(2007) further investigate the strong rise in the service sector’s TFP
and provide another more mundane explanation that output growth
in services has been overstated due to an underestimate of services
price inflation. However, other studies have delved deeper into the
services sector to investigate the high productivity growth, which is
discussed next.
Goldar and Mitra (2008) examined the services sector in depth as
their analysis showed that the rise in the TFP growth at the economy
level in the post-1980 period is mainly traceable to the increase that
took place in the growth rate of the TFP in the services sector. Of the
2.4 percentage point increase in growth in the post-1980 period, they
attribute about 40 per cent to a faster growth in the TFP in services.
Going into the sub-sectoral performance within services, Goldar and
Mitra found that on labour productivity, it was the financial services
that saw the highest growth across the years, but when it came to
capital productivity, trade, hotels, and restaurants stood out with a
very sharp decline in the pre-1980 period being reversed dramati-
cally after 1980. Overall, while the TFP rose fastest in financial and
business services from the 1970s; the crucial determinants for the
post-1980 turnaround were trade, hotels and restaurants, and public
administration and other community services16 (see Table 1.2). There
are severe data caveats and too much should not be read into the

15 Bosworth et al. (2007) note that this decline in employment is ‘puzzling’ as

they have no explanation for it. It could be stemming from the data limitations
in their study.
16 In public administration, the downsizing of the public sector as well as pay

scale hikes for government employees has raised the output per worker. This
could account for a part of the growth in productivity in this sub-sector.
16   laveesh bhandari and sumita kale

Table 1.2 Growth rates in the total factor productivity,

sub-sectors, and services
Sub-sectors of services Growth in the TFP (per cent per annum)
Pre–1980 Post–1980 1960–1 to 2006–7
Trade, hotels, and restaurants –3.4 2.9 0.2
Transport, storage, and 2 3 2.2
communications
Financing, insurance, real estate, 2 3.9 3.5
and business services
Public administration and other 1.1 3.5 2
community, social, and personal
services.
Services sector (total) 1.3 3 2.1
Memo: Estimates of Bosworth, 0.4 2.9 1.7
Collins, and Virmani (2006) for
aggregate services sector
Source: Goldar and Mitra (2008, 14).

300

250

200

150

100

50

0
1960–1

1970–1

1980–1

1990–1

2000–1

2006–7

Transport, Storage, Public Administration Trade and Hotel

and Communication and Others
Financial, Insurance, and Business Services

figure 1.3 Total factor productivity index (1960–1 = 100)

Source: Goldar and Mitra (2008, 14).
 sources of growth in india   17

rise in productivity of these sectors, since the higher TFPG in public

administration could stem from the rise in the pay scales of public
sector employees. Moreover, it is not clear whether the measurement
of capital stock and definitions of the sectors have remained consistent
over the large time periods being analysed.17
Despite these problems, Goldar and Mitra’s results clearly indicate
the turning points of financial sector productivity improvements to be
as early- to mid-1980s, that of trade and hotels to be the mid-1990s,
and that of transport, storage, and communications to be the 2000s.
The lack of event studies, however, prevents us from identifying
whether the infusion of technology in the mid-1980s in the banking
sector or the greater international orientation of post-1991 India
impacted the trade sector; whether infrastructure improvements in
the road sector that commenced in the early 2000s or, for that matter,
mobile telephony that was finally spreading in the 2000s can be held
responsible for these patterns.
It must be noted that the high growth in productivity in the ser-
vices sector had a beneficial impact on the other sectors. For instance,
industrial productivity growth is related to financial, physical, and
social infrastructure (Mitra et al. 2002), and the new skill-intensive
activities, particularly in the IT sector, that are a part of services pro-
vide significant support to the manufacturing productivity growth.
Similarly, trade and transport have high linkages, supporting both
agricultural and manufacturing growth and productivity. In short, the
high productivity growth in the services sector was also crucial for
other sectors.
The impact of reforms in the services sector on manufacturing pro-
ductivity was analysed by Arnold et al. (2012). They found expectedly
that the rise in service sector productivity contributed significantly
to manufacturing productivity, but they also found an ordering—
banking, telecom, insurance, and transport, all of which led to signifi-
cant productivity rises in manufacturing firms. Using the panel data
for 4000 firms over 1993–2005, they showed that a one-standard-
deviation increase in the aggregate index of services liberalization

17 There are severe issues of definitions across the years that have caused
different researchers to come out with different results.
18   laveesh bhandari and sumita kale

resulted in a productivity increase of 11.7 per cent for domestic firms

and 13.2 per cent for foreign enterprises.
What about productivity in agriculture? Some studies find that
there has been a moderation in the agricultural productivity growth
in recent years. Bosworth et al. find the TFPG in agriculture increas-
ing till 1999, but moderating thereafter. The reasons behind the rise
were of course the Green Revolution, improvements in inputs, and
labour reallocation away from agriculture, while moderation has been
explained by lower returns to government research and development
(R&D) and extension services. On similar lines, Saikia (2009) found
that the TFPG for agriculture declined in the 1970s, grew in the 1980s,
and declined again in the 1990s, showing a possible connect with
public sector investments. Goldar et al. (2016) obtain a similar result.
Das (2016), however, finds an increase in the agriculture TFPG in
2000–2008 (1.7 per cent) vis-à-vis 1981–2000 (1 per cent). However,
these studies are based on pre-2011 data and little is understood of the
improved agri-growth rates of the 2010s.
When it comes to manufacturing, Bosworth et al. find the TFPG
for industry slowing and not accelerating in the post-reform period
that they analyse till 2004. However, this has been accepted as a
natural phenomenon in economies that are starting from a protected
environment that adapting to new technology in a liberalized world
has a time lag. On the other hand, employment growth has not been
commensurate with growth overall, leading to improved labour
productivity. However, a note of caution by all researchers investigat-
ing the industry TFPG, results are not conclusive: as Kathuria et al.
(2010) report, ‘Krishna and Mitra (1998), Pattnayak and Thangavelu
(2005), Unel (2003), among others, find an acceleration in total factor
productivity growth (TFPG) in the reform period, whereas studies by
Trivedi et al. (2000), Srivastava (2000), Balakrishnan et al. (2000), and
Das (2004) find a deceleration in the TFPG in the 1990s.’
A comprehensive study on the TFPG in manufacturing in India
by Trivedi et al. (2011) systematically lays out all the issues in the
estimation of the TFPG in India, and one of their results is that for
1980–1 to 2003–4, the contribution of the TFPG to output growth
for the organized manufacturing sector ranges between 13 and
25 per cent, depending on which methodology is used. Before analys-
ing the reform impact per se on growth, they put forth two issues: it is
 sources of growth in india   19

difficult to isolate the impact of reforms from the other factors which
affect the TFPG, and there could be time lags, only after which the
impact of the reforms could be felt on the TFPG. Despite the caveats
they give, their results across various industries and states do indicate
an increase in the TFPG post-1990s.
Interestingly, Rodrik and Subramanian (2004) analyse the surge
in aggregate factor productivity after 1979 and reject all commonly
postulated causes behind this rise in productivity—external and
internal liberalization, aggregate demand, public investment, fiscal
expansion, Green Revolution, etc. They make the point that the pro-
business stance of the government post-1980 led to a higher produc-
tive utilization of resources. They base their reasoning on regional
analysis to show that states whose governments were allied with the
Centre grew faster than the others post 1980, thereby benefitting only
those states that already had large formal manufacturing, the focus of
the pro-business attitude.
On similar lines, Aghion et al. (2008) argue that there is a differ-
ential impact across states when it comes to manufacturing produc-
tivity, their main result being that the response to delicensing varies
significantly depending on the labour market conditions prevailing in
different Indian states. The fact that there would be strong state-level
factors that are playing a role is quite obvious and needs to be looked
at in greater detail; the next section looks precisely into this aspect of
regional differences in growth.
Despite all the studies done so far, there is still a lot we do not
know. For instance, how has infrastructure impacted growth? While
many point to how poor infrastructure is harming growth in India,
few studies pointed to how successes in the sector had a positive
impact on growth rates. Since the latter part of the 1990s, India has
built an impressive network of rural roads, constructed a massive
telecom network which is accessed by all including the very poor,
and has been able to make almost all children who are at the primary
school-going age literate. Few studies are able to tie-in the productiv-
ity impact of these social and physical infrastructure developments
of the 2000s.
Under the World KLEMS Initiative, the project ‘Disaggregate
Industry Level Productivity Analysis for India: The KLEMS’
(RBI, 2016) has been ongoing since 2009, with the support of the
20   laveesh bhandari and sumita kale

Table 1.3 Key results on the total factor productivity growth in

India
Author Time Period Main Results
Dholakia (2001) 1960–1 to 2000–1 1960–85, the TFPG contributed less
than 22 per cent of the overall growth
rate. 1985–2000 TFPG accounted for
48 per cent of the overall growth.
Bosworth et al. 1960 till 2004 Effect of the TFPG in growth shows
(2007) post-1983.
Saikia (2009) 1960–2000 The TFPG for agriculture declined in the
1970s, grew in the 1980s and declined
in the 1990s, showing a possible
connect with public sector investments.
Goldar and 1960–80 and 40 per cent of the 2.4 percentage point
Mitra (2008) 1980–2004 increase in growth post-1980 is due
to faster Services TFPG. Overall, the
TFP rose the fastest in financial and
business services from the 1970s. Trade,
hotels and restaurants, and public
administration and other community
services were crucial for the post-1980
turnaround.
Arnold et al. 1993–2005 Rising service sector productivity
(2012) contributed significantly to
manufacturing productivity. Banking,
telecom, insurance, and transport all
led to significant productivity rises in
manufacturing firms.
Kathuria et al. Review of studies giving conflicting
(2010) results for manufacturing sector
productivity depending on the period
analysed and methodology used.
Trivedi et al. 1980–1 to 2003–4 Contribution of the TFPG to output
(2011) growth for organized manufacturing
sector ranges between 13 and 25 per
cent, depending on which methodology
is used.
Rodrik and 1970s to 2000 Surge in aggregate factor productivity
Subramanian after 1979 due to the pro-business
(2004) stance of the government post-1980,
leading to higher productive utilization
of resources.
 sources of growth in india   21

Aghion et al. 1980–97 Differential impact of delicensing across

(2008) states on manufacturing productivity,
depending on the state's prevailing
labour markets conditions.
Goldar et al. 1980–2011 The average TFP growth for informal
(2016) manufacturing lower than that of
formal manufacturing over 1980–2011;
both segments showed a decline in the
rate of TFP growth during 1994–2002
as compared to 1980–93, with marked
acceleration over 2003–11.
For 2003–11, the rate of TFP growth
achieved by the formal segment of
Indian manufacturing was higher than
that of Korean manufacturing, even as
labour productivity in Indian industrial
enterprises was lower than that in
Korean manufacturing enterprises in
most industries.
Das (2016) 1981–2008 The agricultural TFP growth in India
ranged around 1 per cent during
1981–90 to about 1.7 per cent during
2000–8.
Source: Authors' compilation.

Reserve Bank of India. The KLEMS methodology, with gross out-

put as a measure of output and capital (K), labour (L), energy (E),
material (M), and services (S) as inputs, is being applied in many
countries and the India study examines the productivity perfor-
mance for 1980–2011 using both value added as well as gross output
specifications of the production function. The main results indicate
wide industry variations in productivity growth for the 27 industries
under study; majority of industries show a faster TFP growth since
2000. However, in three broad sectors—agriculture, construction,
and mining and quarrying—productivity performance was poorer
in the post-2000 period.
Goldar et al. (2016) use the KLEMS dataset to analyse the produc-
tivity performance in the formal and informal segments of Indian
manufacturing industries. The average growth rate in the TFP in
informal manufacturing over 1980–2011 was found to be significantly
22   laveesh bhandari and sumita kale

lower at 0.4 per cent per annum, compared to 4.2 per cent per annum
for formal manufacturing. Both segments showed a decline in the
rate of TFP growth during 1994–2002 as compared to 1980–93, with
marked acceleration again over 2003–11. The improvement in the TFP
growth in the aggregate formal manufacturing segment since 2003
is mainly due to the improvement in the TFP growth performance
of the petroleum refining industry, with some contribution made by
chemicals and chemical products industry. Within informal manu-
facturing, the improved performance after 2003 is mainly due to three
sectors—Textiles and Leather Products, Wood and Wood Products,
and Chemicals and Chemical Products. Interestingly, the paper found
that for 2003–11, the rate of the TFP growth achieved by the formal
segment of Indian manufacturing was higher than that of Korean
manufacturing, even as it found that labour productivity in the Indian
industrial enterprises was lower than that in the Korean manufactur-
ing enterprises in most industries. The authors noted that this ‘puzzle’
calls for a deeper investigation.

Interstate Differences

India’s 35 states and Union Territories (UTs) have diverse socio-

economic profiles and despite planning and controls aimed at a bal-
anced regional growth, the states were quite far apart even till the
1980s. Did liberalization accentuate these differences or did it provide
an environment for convergence? There is a caveat at the beginning
of any regional study in India that analysis over a long period, as
done for national income, is not possible for all states, especially since
the data for the newly formed states is not available pre-1993.
Further, studies looking at convergence of states over time have had
diverse results depending on the time period analysed, the number
of states in the sample, the benchmarks used for comparison, etc.18
Focusing purely on the impact of reforms, there are again a num-
ber of studies that show that states adopted disparate growth paths

18 For more details on these studies, see Singh et al. (2003).

 sources of growth in india   23

post-reforms, for example, Bhattacharya and Sakthivel (2004) found

increasing inequality in the per capita regional output after 1991, Kar
and Sakthivel (2007) used the ‘new geography’ framework to analyse
the impact of reforms on the per capita regional output to validate
the theory of post-reform divergence across states, Sachs et al. (2002)
worked on 1980–98 for 14 states and found that there was an overall
increasing divergence over the period, with greater divergence dur-
ing 1992–8. Interestingly, the richer states showed convergence over
1992–8, while the poorer states in the sample did not. The reason pos-
tulated by the authors for the divergence was the regional differences
in the marginal productivity of investments by the sub-sector. This
stemmed from the general business environment and also the specific
geographical factors. Therefore, the Green Revolution benefitted
the states of Punjab and Haryana, while the service sector reforms
benefitted Maharashtra, Tamil Nadu, Karnataka, and Delhi where the
initial conditions were favourable for these activities.
Singh et al. (2003) noted that the results on regional inequality
were sensitive to the measures of attainment used; hence, while the
analysis using state income showed divergence over the post-reform
period, human development indices did not show the same increase
in regional inequality. Liberalization had led to a more efficient alloca-
tion of private capital, foreign as well as domestic, and while this would
lead to a more uneven balance, depending on the state policies, they
found that governments in poorer states such as Madhya Pradesh and
Rajasthan had improved, on average, the relative standard of living of
their constituents. Their conclusion, therefore, was that liberalization
does not necessarily leave certain states behind.
A more recent study using club convergence and polarization as
the methodology, by Kar et al. (2010), shows that there is an increas-
ing inequality and polarization into two clubs, that is, over the period
analysed (1993–2005), some of the middle-income states have moved
up (relatively) and other middle-income states have fallen back,
creating two separate groups. According to their analysis, the middle-
income states that have fallen back are either inland, as opposed to
coastal states, or have political unrest in the form of insurgencies. The
reasons given, therefore, show that reforms have been favourable to
those states that have conducive geographies or social structures.
Exploring the Variety of Random
Documents with Different Content
same time that it does not undervalue any of God’s commands. Now
this mark Christianity has, and Judaism wants. The former teaches
expressly, That without holiness no man shall see the Lord, and that
for the want of it no external ceremonies can compensate. Further,
Christianity knows of no violent methods of propagating the truth. It
nowhere tells its followers, when they have the power, to compel all
men to embrace its doctrines, or to put them to death if they refuse.
It has not a criminal code written in blood, and prescribing floggings
of rebellion, or even death, for a mere ceremonial offence. It does
not allow each individual teacher to torment the people by
excommunication and anathema at his pleasure. And lastly, it does
not misrepresent God as an unjust and partial judge, who confines
the benefits of revelation to one small nation, and sentences the
overwhelming majority of mankind to unholiness and unhappiness. If
ever Judaism should attain to universal dominion, and the principles
of Judaism be brought into action, the whole Gentile world would be
doomed to misery and ignorance. By pronouncing that amongst
Gentiles there is no marriage-tie, it would rob them of all domestic
peace. By sentencing every Gentile reader of the Bible to death, it
would deprive them of all the consolations and instructions of the
Word of God, and by forbidding them to keep a Sabbath, it would, so
far as it could, annihilate every token of God’s care and loving-
kindness. The triumph of Christianity, on the contrary, and the full
development of all its principles, would fill the world with peace, and
joy, and happiness. The fundamental principles of Christianity,
namely, that the Messiah has died for the sins of the whole world,
sets forth God as the tender father who cares for all his children, and
therefore teaches all men to regard one another as fellow-heirs of
the same eternal salvation. It does not deny that Israel has peculiar
privileges as a nation, but fully acknowledges that “they are still
beloved for the fathers’ sakes,” and that they are yet to be the
benefactors of the human race as they were of old. But it asserts, at
the same time, that God is not the God of the Jews only, but of the
Gentiles also, and thus makes it possible for Jew and Gentile to love
each other. The only foundation for the peace and unity of all nations
is the recognition of God as the Father of all, and this foundation is
the very corner-stone of Christianity, whilst it neither does nor can
form any part of the fabric of Judaism. Christianity teaches that the
first and great commandment is, Thou shalt love the Lord thy God
with all thy heart; and the second is, Thou shalt love thy neighbour
as thyself; and teaches, at the same time, that all men are our
neighbours. Judaism teaches that circumcision is the greatest of all
the commandments, and that none but Jews and proselytes are
neighbours. Thus Judaism divides, whilst Christianity tends to unite,
all the children of men in the bands of peace. It has only one
principle of God’s dealings to men, and that principle is love; and one
principle for the guiding of man’s conduct to men, and that is love
also. Let not the Jewish reader think that we Gentiles wish to ascribe
any merit to ourselves, as if by our own wit or wisdom we had found
out a religious system superior to anything that Israel had been able
to devise. Far from it; we acknowledge again, as we did in the first
number, that we are only disciples of one part of the Jewish nation.
From the Jews Christianity came to us. It has been a light to lighten
us Gentiles, but we acknowledge its Divine Author as the glory of his
people Israel. All we mean by instituting the comparison is, to show
those who still adhere to the oral law, that there is another Jewish
religion infinitely superior, and more like that of Moses and the
Prophets. And we appeal confidently to every reader of these papers
to decide whether the New Testament or the Talmud is the better
book, and to say which is the most agreeable to the will of God as
revealed to their forefathers. We earnestly call upon them to make
the decision, and to deliver themselves from that unmerited weight of
odium which has rested upon them for centuries; and from that still
more dreadful evil, the displeasure of Almighty God, which has
followed them ever since they forsook the Old Paths wherein their
fathers walked.
It is time for those, at least, who profess to abhor certain parts of the
Talmud and oral law, to justify their professions by consistent
conduct. If they wish people to believe them when they profess love
and charity towards all men, they must begin by repudiating the
authority of the oral law, and renouncing the worship of the
synagogue. How can we possibly believe that those are sincere in
their professions to men, who declare that they are insincere in their
worship of the heart-searching God? Every man who uses the
prayers of the synagogue, there confesses himself to God as a
believer in the oral law, and consequently ready to execute all its
decrees of cruelty, fraud, and persecution—ready, when he has the
power, to convert all nations with the sword. That is his profession in
the synagogue; when, then, he comes forth from the solemn act of
Divine worship, and tells me that he is liberal and charitable, and that
he abhors persecution, how can I possibly believe him? There is
falsehood somewhere, and the only possible mode of removing this
appearance is by a public renunciation of the oral law, and an
erasure of those passages in the public prayers which affirm its
Divine authority. This all truly liberal-minded Jews owe to
themselves, to the Christian public, to their brethren, and, above all,
to their God. To themselves they owe it, because so long as their
words and their deeds contradict each other, a mist hangs over
them. To the Christian public they owe it, for they must naturally
desire to know the principles of those with whom they are connected.
To their brethren they owe it, for this is the only way of delivering the
nation from the calamities of centuries. To their God they owe it, for
by the blasphemies of the oral law, His character is misrepresented,
and His name blasphemed.
THE END.
 INDEX.

Abarbanel, 124
Aben Ezra, 123
Abraham at the door of hell, 450
Adam, 136
Agadah, recognized in Jewish Prayer-book, 3
Ahijah, the Shilonite, fable about, 352
Almsgiving, Rabbinic, 302
merit of, 307
Amhaaretz, meaning of the word, 458
disqualifications of, 459
may be robbed and slain with impunity, 461
lawful to kill, 6
Amulets, virtues of, 183
Angels carry up the sound of the horn at new year, 267
Angels, of the waves, 197
Angel, evil, 229
Angels ministering, 164
Apostates, to be killed, 36
Arbah, Turim, 112
Astrology, taught and practised, 175
Atonement, day of, 279
 itself an atonement, 279
repentance an, 279
a cock killed as an, 283
death an, 299

Baptism necessary to a proselyte, 304

Bar Kochav, 222
Bechai, 142
Behemoth, legend of, 128, &c.
Bither, the city of, 216

Cain, 138
Catechism, Bavarian Jewish, 25
gives a false view of Judaism, 26
Charity, Rabbinic, 112
Charm, Rabbinic, for a bleeding of the nose, 192
for the bite of a mad dog, 193
for a storm at sea, 196
for the bite of a scorpion, 200
Charms allowed on the Sabbath-day, 200
Charm for bed time, 201
Christianity, a Jewish religion, 1
Christianity, the religion of the New Testament, 2
Christians considered as idolaters, 419
not counted amongst the pious of the nations, 4
not in a state of salvation, 4
Circumcision equivalent to all the commandments, 451
meritoriousness of, 450
Cock, killing a cock as atonement, 283
Commandments, 442; 162
Cruelty, Rabbinic, 8, 99, 209
to women, 377

Dead, Rabbinic mourning for, 428

prayers for the, 295
Death, an atonement, 299
Demons, asking counsel of, 203
Deniers of the law, three classes of, 4
Deputies, French Jewish, 24
Deuteronomy xvii. 8, &c., explained, 11
Dispensation, Rabbinic, from oaths, 434
Divorce, Rabbinic, doctrine of, 373
Drunkenness allowed on feast of Purim, 47

Edomites, Christians called, 123

Eleazar, Rabbi, 6
Elijah, the Prophet, conversation of, with R. Jose, 323
Epicureans, 4
to be killed, 36
Epicurean, reader in synagogue suspected of being, 127
Evasion, Rabbinic, 80, 83, 107, 225, 235
Excommunication for not washing hands, 75
Rabbinic, 239
laws concerning, with respect to the unlearned and learned, 239
injustice of, 239

Fast on the ninth of Av, 216

Fasting, merit of, 264
Fire, not to be extinguished, 102
Flogging of rebellion, 99, 211, 228, 383, 386, 420
Friday, Good, 87

Gentile, who studies the law, guilty of death, 22

who keeps a Sabbath-day, guilty of death, 22
good advice not to be given to, 33
woman not to be helped in child-bed, 33
not neighbour, 34
lost property not to be restored to, 35
Daniel punished for giving good advice to, 33
who wishes to turn Jew, 63
a Jew not publicly to receive alms from, 306
Sabbath not to be profaned to save a Gentile’s life, 212, 214
food regarded as carrion, 383
food not to be eaten, 383, 416
wine unlawful, 419
he that steals from, only to pay the principal, 34
wine, to drink, worse than fornication, 424
Gentiles, idolatrous, to be exterminated, 42
to be converted by force, 42
idolatrous, not to be suffered in the land of Israel, 28
Gentile, drowning, not to be delivered, 30
Gentiles, duties towards, 24
not brethren, 26
not neighbours, 26
not to be greeted except from fear, 10, 26, 28
condemned for transgressing the command about tabernacles,
288
still have the defilement of the serpent, 156
cursing the, on the feast of Passover, 120, 121, 122
no pious, now, 67
marriage of, not binding, 58
 and dogs, 107
Gershom, R., anathema by, 366

Hands, laying on of, 328

washing of, 71
Heathen, who are not in a state of salvation, 5
High Priest, an unlearned man, 7
Hilchoth Accum, 28, 33
Avadim, 21
Avel, 428
Berachoth, 71, 73
Deoth, 113
Genevah, 34
Gezelah, 34
Girushin, 375
Gittin, 374
Iom Tov, 116
Ishuth, 366
Issure Biah, 64
Kiddush Hachodesh, 100
Maakaloth Asuroth, 419
Mamrim, 335
Matt’noth Aniim, 304
Megillah, 48
Mikvaoth, 72
M’lachim, 22, 25
P’riah u’r’viah, 7
Rotzeach, 32, 33
Sanhedrin, 172, 342
Sh’vuoth, 436
Taanith, 216
Talmud Torah, 17, 148
T’phillah, 2, 128
T’shuvah, 4, 247
Hillel, the elder, 187
Holyday, how to make fire on, 106
Holydays, additional, prescribed by the rabbies, 98, 101

Jeremiah unjustly condemned, 13

Jewish-German, 283
Jews persecuted in Spain and Portugal, 42
Illegitimate, a learned man takes precedence of High Priest, 7
Intolerance, Talmudic, 28-39
Ioma, 19
Jonathan, son of Uzziel, 187
Jost’s history, 125
Isaac, merit of offering, 271
Jubilee, year of, 66
Judaism the religion of the oral law, 2
and of the Jewish Prayer-book, 2
and Christianity cannot both be true, 3
a false religion, 465
its authors wicked men, 467
Judgment, Rabbinic, idea of the final, 287

Karo, R. Joseph, 17
K’hillath Shlomoh, 282
Kiddushin, 19
Kimchi, 93

Leaven, putting away of, 80

Legends, 127-167
Levi, family of, still known, 312
privileges of, in the synagogue, 313
David, 134
Leviathan, legend of, 128, &c.
Levites, scriptural privileges of, 311
Liberty, religious, first taught by Jesus Christ, 46
Luck, good, 182

Magic allowed by Talmud, 168-174

Maimonides, 25, et passim
intolerance, 26
Meat, lawful and unlawful, 397
in milk, laws concerning, 404
contrary to Scripture, 404, 405
Medrash Rabba, 153
Merit of ancestors, 285
Merit, doctrine of, 247, &c.
Messiah, already come, 387
Miracles, Rabbinic, 203
Mishna, recognised in Jewish Prayer-book, 3
Mixture, Rabbinic, command of, 116
Muktzeh, 103

Napoleon, 24
New Year, Jewish, 247
New Year, judgment at, 247
prayers for, 264
 merit and advantage of blowing the horn on, 266
Noachidæ, 25, 41
who they are, 55
seven commandments of, 56
may transgress commandments, 57
murderer of, not to be put to death, 62
unintentionally killing a Jew, to be put to death, 61
when received, 67
how received, 68

Oral law opposed to the Word of God in duty to parents, 9, 10

a mixed system of good and evil, 16
how much time to be devoted to the study of, 16
women and children not to study, 18
perpetual and unchangeable, 53
precepts of, given to Moses, 161
Oaths, Rabbinic dispensation from, 435, 450

Parable of Good Samaritan illustrated, 29

Parents, if in captivity, to be redeemed after the Rabbi, 9
duty to, according to oral law, 9
Passover, rites of, 79
Christ our, 91
four cups of, 96
Pentecost prayers, 145
Pesachim, treatise, 6
Pharisees, enemies of the Lord Jesus, 9
bad men, 8
Physician, Jewish, not to cure idolaters, 33
Pirke, Eleazer, 137
Planets, 175
Polygamy, allowed, 366
Poor, Rabbinic, oppression of the, 97
Rabbinic religion not for the, 237
Rabbinic cruelty to, 414, 429
Power, Rabbinic, to excommunicate, 239
Prayer-book, Jewish, acknowledges and teaches the authority of the
Talmud, 2, 3
Jewish, full of legends, 127-167
Priests, scriptural office of, 310
Proselytes, sojourning, 26
how to be instructed, 63
baptism of, 304
Purgatory, Rabbinic, 296
Purim, feast of, 47

Rabbi, duty to, goes before duty to parents, 9, 10

fear of, as the fear of God, 11
reverence due to, 15
whosoever despises a, to be excommunicated, 15
not to forgive a public affront, 243
method of creating a, 328
Rabbies not agreed, 399, 400
Rabbinic charity, 112
evasion, 107, 110
order, novelty of, 328
power to excommunicate, 239
acknowledgments that Messiah is born, 389-393
Ramban, 142
Rome called Edom, 123
Rosh Hashanah, 298
Saadiah Gaon, 162
Sabbath, unlawful for a Gentile to keep a, 22
laws of, 104, 114-119
spirits cannot be cited on, 141
damned have rest on, 141
Sabbath-day, amulets on, 184
Sabbath, laws concerning, 285-290
lamp, reward for, 229
moving things on, 232
merit of keeping the, 224
jurisdictions, 232
Salvation, who are excluded from, by the oral law, 4
Sambation, 139
Sanhedrin, not infallible, 8
great council of, 168
members of, magicians, 168
understood seventy languages, 168
all handsome men, 171
pillar of the oral law, 335
a later, may reverse the decision of a former, 335
not a Divine institution, 337
of Greek origin, 341
greater and lesser, 343
business of, 345
death to those who rebelled against, 344
contrary to Scripture, 345
Parisian, 366
Satan deceived by the blowing of the horn in the month of Elul, 266
Scapegoat, 280
Schoolmasters, Rabbinic, 315
Scripture, women not bound to study, 18
not to be studied so much as the Talmud, 16
when not to be studied at all, 17
Sepher Jetzirah, 181
Schulchan Aruch, 7
Sinai, 163
Slaughtering, laws concerning, 380
laws of, 396
Slaves exempt from the duty of studying the law of God, 17
unlawful to teach, 21
regarded as beasts, 431
Souls of all Israel at Sinai, 152
Sotah, 76
Stars, influence of, 175
Study of the law equivalent to all the commandments, 51

Tabernacles, feast of, 287

merit of, 287
prayers for the feast of, 295
Talmud, recognised in Jewish Prayer-book, 3
legends of, 128, 167
Tradition, Rabbinic argument for overthrow, 11
no unbroken train of, 350
Treatise, Avodah Zarah, 291
Bava Bathra, 187
Berachoth, 161
Gittin, 192
Moed Katon, 175
Shabbath, 157
Succah, 180
Z’vachin, 150
Turnus Rufus, 140, 216
Unlearned man, lawful to kill, 6
the wives and daughters of, not to be taken as wives, 6
to be accounted as beasts, 6
man, unlawful for, to eat meat, 7

Van Oven, Joshua, Esq., Manual of Judaism, 465

Venus planet, 177
Washing of hands, 71
to neglect, as bad as fornication, 76
who neglects, excommunicated, 75
Wine, Gentile, unlawful, 419
Woman, insane, to be turned out, 377
Women, exempt from the duty to study the law, 17
do not receive the same reward as a man, 18
not to be taught the law, 18
minds of, not equal to the study of the law, 18
command of Moses, respecting, 21
duties of, prescribed in New Testament, 22
Rabbinic degradation of, 359
cannot give testimony, 360
not regarded as part of the congregation, 361
World to come, who are excluded from, 4
all Israel has a share in, 64
Rabbinic opinions about, 129

Printed at the Operative Institution, Palestine Place, Bethnal Green,

London.

Footnotes
1. Published originally January 15, 1836.
 2. Joreh Deah, sec. 246.

3. Literally, ‫תיפלות‬. In the translation of this word we follow the

interpretation of the Joreh Deah, which renders it ‫דבר עבירה‬.
This is obviously not the place to discuss the other opinions of
the Rabbies.

4. See Kiddushin, fol. 29, col. 2.

5. Joma., fol. 66, col. 2.

6. Fol. 59, col. 1.

7. Transactions of Parisian Sanhedrin, p. 178.

8. Lehrbuch der Mosaischen Religion. München, 1826, page 150.

9. We quote the passage as we find it. Noachides is here taken

for the seven commandments of the children of Noah, contrary
to the usual acceptation of the word.

10. Hilchoth Accum, c. x. 1.

11. Hilchoth Rotzeach, c. xii. 15. See also Bava Bathra, fol. iv. col.
1., about the middle of the page, where the punishment of
Daniel is more fully discussed.

12. Jost. volume vii. p. 91.

13. Hilchoth Rotzeach, c. iv. 10.

14. Dr. Jost’s Geschichte der Israeliten, vol. vii. p. 93.

15. Instead of ‫ לנד‬alone, there is another reading, ‫לנד׳׳‬, the tribunal.

16. Jewish Prayer-book, p. 152.

17. The British Jews of Burton-street Synagogue have expunged

from their prayers the intolerance here complained of.
18. See Jost’s Geschichte, vol. i. 70 and 153.

19. This alludes to ‫בהמות‬. See Job xl. 15, &c. D. Levi.

20. According to Rashi.

21. According to Rashi, one who goes from house to house to get
alms.

22. Rashi says a man who is liberal in almsgiving.

23. The only explanation which Rashi gives of these words is ‫לחש‬
‫“ הוא‬It is a charm.”

24. Literally, ‫“ לחש הוא‬It is a charm.”—Rashi.

25. The Bareitha.

26. Such as a key, a ring, or a knife.—Rashi.

27. Hilchoth Shabbath and Hilchoth Eruvin extend from fol. 140 to
fol. 226.

28. That is, if the Sabbath commence before he can get to a

resting place.

29. ‫דחמור אתה מצווה על שביתתו ולא דנכרי ׃‬

For thou art commanded respecting the resting of the ass, but
not respecting that of the Gentile.

30. Isaac.

31. “Alluding to Isaac’s being bound; and thus considered as if he

had been offered, and his body burnt to ashes on the altar.”
(Levi’s note.)

32. See the Machsor for the Day of Atonement, in ‫אז מלפני בראשית‬
and for the Passover, in ‫ברה דודי‬.
33. ‫ ולא למהר דאינו יכול לעשותם לעולם הבא ׃‬, ‫היים לעשותם בעולם הזה‬

34. Literally, “a stranger.”

35. Compare Deut. xiii. 13, and Hilchoth Accum, c. iv.

36. This number was originally published December 23, 1836.

37. “A Manual of Judaism,” by Joshua Van Oven, Esq.,

M.R.C.S.L., London, 1835. Page 22.
Transcriber’s Notes:
Footnotes have been collected at the end of the text, and are
linked for ease of reference.
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