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[IWS] ADB: IS INDIA'S LONG-TERM TREND GROWTH DECLINING? [19 December 2014]
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Asian Development Bank (ADB)
ADB Economics Working Paper Series No. 424
IS INDIA'S LONG-TERM TREND GROWTH DECLINING? [19 December 2014]
by Patnaik, Ila and Pundit, Madhavi
[full-text, 29 pages]
The recent decline in GDP growth in India raised a debate about whether it is a trend or a business cycle slowdown. The paper finds that the recent growth decline in India has elements of a business cycle and a trend slowdown.
The paper observed a cyclical downturn post-global financial crisis due to external and domestic conditions, and that the economy also witnessed a negative shock to trend caused by policy uncertainty. With global recovery strengthening and appropriate demand management policies, the cycle can be reversed. Given that the long-run supply of factors appears strong and institutional capacity for reform exists, policy action in eliminating structural bottlenecks in factor markets can render the negative shock temporary. Thus, trend growth can also pick up.
Drivers of Gross Domestic Product Growth
Estimating Trend Growth
Business Cycle Slowdown
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