In the past, the richest states often grew the fastest and the poor ones the slowest. But India's record GDP growth of 8.49% per year in the 5 year period 2004-09 is a case of improved productivity and growth in customarily poor states trickling up and aggregating into rapid growth at the national level. Nobody should call this a success of trickle-down economics. Trickle-down assumes that fast growth can be had simply by changing a few policies that benefit the rich, after which some benefits trickle down to the poor. In fact, miracle growth is globally rare, precisely because it is so difficult for countries to improve the productivity of a substantial proportion of the population.
Only when productivity improvement is widespread is there enough productivity improvement from all regions and people to add up to fast growth. In other words, fast growth does not trickle down; it trickles up. Once a country grows fast, government revenues will boom and can be used to accelerate spending in social sectors and welfare. Miracle growth and record revenues enabled the Central Government to finance social welfare schemes, farm loan waivers and enormous oil subsidies.
This can be called the trickling down of part of the revenue
bonanza into welfare and workfare. But neither welfare nor workfare could have caused the sharp acceleration of economic growth. The growth bonanza itself was sparked by state-level political and policy changes that accelerated local growth, which then trickled up to the national level.
Q. To which of the following factors does the author attribute India's high growth rate during 2004-09?
In the past, the richest states often grew the fastest and the poor ones the slowest. But India's record GDP growth of 8.49% per year in the 5 year period 2004-09 is a case of improved productivity and growth in customarily poor states trickling up and aggregating into rapid growth at the national level. Nobody should call this a success of trickle-down economics. Trickle-down assumes that fast growth can be had simply by changing a few policies that benefit the rich, after which some benefits trickle down to the poor. In fact, miracle growth is globally rare, precisely because it is so difficult for countries to improve the productivity of a substantial proportion of the population.
Only when productivity improvement is widespread is there enough productivity improvement from all regions and people to add up to fast growth. In other words, fast growth does not trickle down; it trickles up. Once a country grows fast, government revenues will boom and can be used to accelerate spending in social sectors and welfare. Miracle growth and record revenues enabled the Central Government to finance social welfare schemes, farm loan waivers and enormous oil subsidies.
This can be called the trickling down of part of the revenue
bonanza into welfare and workfare. But neither welfare nor workfare could have caused the sharp acceleration of economic growth. The growth bonanza itself was sparked by state-level political and policy changes that accelerated local growth, which then trickled up to the national level.
Q. To which of the following factors does the author attribute India's high growth rate during 2004-09?
The correct option is D Improved productivity of traditionally low-performing states
'Improved productivity of traditionally low-performing states' is the factor to which the author attributes India's high growth rate during 2004-07.
'Improved productivity of traditionally low-performing states' is the factor to which the author attributes India's high growth rate during 2004-07.
