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The author would like to thank Kalpana Kochhar, Charles Kramer, Hélène Poirson, and Nirvikar Singh for helpful comments and suggestions. The author is solely responsible for the contents of this paper.
At market prices. Fiscal year starts in April.
IMF Country Report, No. 07/63, India—Staff Report for the 2006 Article IV Consultation.
BCV provide additional angles on India’s growth performance, their estimates per se are very similar to those of Bosworth and Collins (2006).
Capital stock is measured at end-period. Therefore, the capital stock as of end t-1 is used for production at time t, implying one lag for the capital stock growth rate in the growth accounting formula.
Some cross-country studies on consumption in the Asia and Pacific Regional Outlook (2006) and on national saving in the WEO (2005) suggest that the elderly dependency ratio has a much stronger impact on saving and consumption behavior than the overall dependency ratio. In India, the projected increase in the elderly dependency ratio would actually work against growth potential. (Both of the studies include developing countries in the sample and estimate the model for a group of developing countries; and therefore, estimation is not driven by data for developed countries.)
Total domestic saving increased by 9.2 percentage points of GDP, reflecting fiscal consolidation.
WEO followed Jorgenson and Vu (2005) and employed a regression model to construct a labor quality index using educational attainment and institutional variables.
As of early July 2007, the expenditure side GDP data for 2006/07 were still missing errors and omission term for investment, which is needed to estimate the gross investment ratio. The ratio is tentatively estimated assuming the same value for the term in 2006/07 as that in 2005/06.
CSO data show significant changes when National Account Statistics are rebased or revised. For instance, while 1993/94 based data show 3.9 percent annual growth for the 2003/04 real net capital stock, 1999/00 based data show 6.2 percent. In addition, even for the data with the same base year, the estimate for 2004/05 real capital stock growth of 5.6 percent in the 2006 National Account Statistics was revised upward to 7.1 percent in 2007. These types of statistical issues could give rise to significant variations among growth accounting exercises as discussed in BCV (2007). In this paper, the latest CSO estimate for capital stock growth is used as a base, as it is fairly close to the WEO (2006) estimate (WEO shows 8.1 percent for 2005/06 and CSO shows 8.8 percent) based on Nehru-Dhareshwar (1993) and Fajnzylber-Lederman (1999), which serves as a crosscheck. Original estimates by Poddar and Yi (2007), which were based on capital stock data from 2006 CSO estimates, are updated in Table 1 to reflect this upward revision.