2007 OECD Economic Surveys: India 2007

image of OECD Economic Surveys: India 2007

OECD's first economic survey of the Indian economy. It opens with a broad overview of economic developments over the past twenty years, showing how India has grown to become the third largest economy in the world. It then examines a series of specific policy areas including the unbalanced growth across states, competition policy and reforming India's product and service markets, improving the performance of labour markets, improving the financial system, improving the fiscal system, improving infrastructure, and upgrading the educational system. For each policy area, a series of recommendations is made. This book includes StatLinks, URLs linking tables and graphs to Excel® spreadsheets with the underlying data.

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Reforming India's product and service markets

The degree of competition in product markets has been found to be an important determinant of economic growth in both developed and developing countries. This chapter uses the OECD’s indicators of product market regulation to assess the extent to which the regulatory environment in India is supportive of competition in markets for goods and services. The results indicate that although liberalisation has improved the regulatory environment to international best practices in some areas, the overall level of product market regulation is still relatively restrictive. In addition, estimating the product market regulation indicators for 21 Indian states shows that the relatively more liberal states have higher labour productivity, attract more foreign direct investment, and have a larger share of employment in the private formal sector in comparison to the relatively more restrictive states. The chapter goes on to review various aspects of India’s product market regulation and suggests a number of policy initiatives that would improve the degree to which competitive market forces are able to operate.

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