Policy, economic federalism, and product market entry: the Indian experience

Sumon Bhaumik, Shubhashis Gangopadhyay, Shagun Krishnan

Research output: Contribution to journalArticlepeer-review


Productivity growth has long been associated with, among other things, contestability of markets which, in turn, is dependent on the ease with which potential competitors to the incumbent firms can enter the product market. There is a growing consensus that in emerging markets regulatory and institutional factors may have a greater influence on a firm's ability to enter a product market than strategic positions adopted by the incumbent firms. We examine this proposition in the context of India where the industrial policies of the 1980s and the 1990s are widely believed to be pro-incumbent and pro-competition, respectively, thereby providing the setting for a natural experiment with 1991 as the watershed year. In our analysis, we also take into consideration the possibility that the greater economic federalism associated with the reforms of the 1990s may have affected the distribution of industrial units across states after 1991. Our paper, which uses the experiences of the textiles and electrical machinery sectors during the two decades as the basis for the analysis, finds broad support for both these hypotheses.
Original languageEnglish
Pages (from-to)1-30
Number of pages30
JournalEuropean Journal of Development Research
Issue number1
Publication statusPublished - Mar 2008


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