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Tuesday, December 19, 2006

Productivity Miracle In India?

Indian Economy Blog's great new find Nanubhai, has a most enlightening post up about tend growth and productivity in India. One to watch.

Back in the late 1990s, economists were trying to figure out what it was that led to the secular acceleration of economic growth in the United States: the longest and largest peace-time economic expansion in the 20th century (see footnotes). How was it that a country could grow so much and for so long without causing inflation and overcapacity? Was the business cycle dead?

During the boom, the US economy benefited from an unprecedented acceleration in productivity growth. This was driven primarily by the efficiencies created by technological and financial deepening – particularly in the retail, wholesale, electronics, semiconductors, and financial services industries. While the dot-com’s and Stanford techies in pastel suits got the glory, the economy itself was being powered by the Wal-Marts, Intels, and GEs – who were innovating rapidly – and implementing that innovation in long-term strategies to enhance their bottom line.

Now before I get to how this compares to India today, a brief economics refresher.

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