Dynamic Patterns of Structural Change and Economic Growth during the High Growth Regime in India: A Panel Data Analysis

Using panel data collected from the CSO for thirty two states and UTs of India for the recent period of 2004-05 to 2013-14 at the constant 2004-05 prices, the present paper highlights the effect of structural change on economic growth. We examine these relationships in an augmented Chenery-Syrquin Model, and test whether the high income states, EAG (Empowered Action Group) States and high densely states have had any structural impact and what type of structural trends have been adopted by the economy in such a high growth period. Results of random effect model show that any increases in the shares of manufacturing sector and industrial sectors (mining and Quarrying, manufacturing and construction) have significant positive effect on economic growth (Income Coefficient), while the patterns of industrial sector has significant positive effects on population density (Size Coefficient). However, the coefficient of population density is insignificant yet positive for manufacturing orientation. These relationships suggest that most densely populated states can achieve economies of scale, resource endowments and scale of domestic demand easily and hence population density plays an important role in the patterns of industrial and manufacturing development. The time trend seems to have significant negative association with industrial orientation and dummy for high income states has significant positive association with service sector and significant negative association with agriculture and manufacturing sectors.