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Quick Edit | Schumpeter in India

Quick Edit | Schumpeter in India
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First Published: Sun, Nov 15 2009. 11 43 PM IST
Updated: Sun, Nov 15 2009. 11 43 PM IST
Hopes of a new wave of economic reforms are once again in the air.
There is little doubt that more than 25 years of reforms have lifted growth rates in India and helped pull millions out of poverty. An India that mortgaged gold in 1991 has now bought 200 tonnes of it from the International Monetary Fund.
But economic reforms offer another promise: the opportunity for new firms to elbow out incumbents and inject continuous economic vitality. New research by Laura Alfaro and Anusha Chari suggests that this promise has not been met. State-owned companies and firms set up before 1985 continue to dominate the business landscape; the only exception is the growing importance of new private companies in the services sector.
Why does India’s business structure continue to be ossified? Is this an indication of oligopolistic capitalism? Do new firms not get access to finance? Does the inspector raj hit start-ups harder than older firms that have learnt to game the system?
These are reasons for worry if you believe in Schumpeterian renewal.
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First Published: Sun, Nov 15 2009. 11 43 PM IST