Abstract:
A stylised fact of India’s economic history since 1950 is that the rate of growth of the economy has accelerated periodically and across policy regimes. In this paper we present a theoretical framework that can generate such a pattern due to cumulative causation through positive feedback. The growth process is then investigated using cointegration analysis. We are able to establish the existence of positive feedback which is at the centre
of cumulative causation. We are also able to date the onset of this mechanism which has driven growth in India for close to half a century by now. This leads us to conclude that the internal dynamics are at least as important as the policy regimes to understand growth over the long term in this country.
