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Written by The Financial Express | Updated: Dec 1 2009, 03:39am hrs
Using firm-level data, this paper* analyses the transformation of Indias economic structure following the implementation of economic reforms:

In this paper we analyse the evolution of Indias industrial composition by focusing on the microfoundations of its productive structure: we examine the evolution of Indias industrial structure at the firm level following reforms. In addition to changes in the industrial composition, we examine whether entry took place and if so, whether at the expense of traditional incumbents such as state-owned and traditional private firms. Finally, we examine the evolution of firm size, market share and industry concentration over time and in industries that were liberalised to either domestic or foreign entry or trade. Using firm-level data, we document dynamism and change in the productive structure following the implementation of economic reforms. Substantial new entry by foreign and private firms went along with high growth in their assets, sales and profits. In recent years, for example, some new and important private players have emerged in sectors such as IT services, pharma and telecom. However, despite the substantial increase in the number of private and foreign firms, the overall pattern that emerges after close to two decades of reforms is one of continued incumbent dominance in terms of assets, sales and profits: state-owned firms and traditional private firms. In sectors dominated by state-owned and traditional private firms before liberalisation (with assets, sales and profits representing 50% or higher shares), these firms remain the dominant ownership group following liberalisation.

* Laura Alfaro and Anusha Chari; India Transformed Insights From The Firm Level 1988-2005; Working Paper 15,448, National Bureau Of Economic Research, October 2009