Robert Lawrence Comments at IPF 2009 India Transformed? Insights from Firm Level By Laura Alfaro Anusha Chari

Paper Use Prowess firm data to explore behavior since Consider number, size, concentration by ownership type: state, group, private and foreign. Mainly a descriptive exercise that is hopefully a prelude to much more intensive analysis. There are some findings that paint a mixed picture: There is dynamism in the number of new firms that enter and considerable growth in the incumbents, but there also seems to be continued domination of sectors by ownership mode: In addition there is not a lot of movement in profit rates

Comments. Appraisal Overall this is an interesting start as a description but still lots of work to be done for explanation and implication There is a lot of scope for more intensive investigation. While it is true that incumbents still dominate, more shifts in shares than they suggest. Specific comments: Motivation Data. Methodology. Findings.

Motivation: what should happen in theory Micro Evidence relating to relative shares by ownership type. But of What? What should we expect ? Paper also offers no model of how we might expect the policy changes that are being investigated to change ownership shares. You could think of modelling this in a number of different frameworks. One example of imperfect competition. Expectation after trade would be fewer larger firms operating closer to full capacity, or model of monopoly – we might have larger firm, operating with reduced profits, or monopoly with competitive fringe. So I really missed the theory of what we should expect. Paper does not really tell us why we should care. What should we want? should we care if the State owned share in India remains high.? State owned – does this mean the development state is working or the capitalist system is not working – actually in numerous cases profitability not all that different. But it would be interesting to explore this in detail. Good or Bad? Problems of mixing private and public – USA fannie mae and freddie mac. Many were disappointed privatization did not happen on a large scale so this is a very important topic in India today, but the paper did not really enlighten the reader much of this issue. Group owned. Should we care if this is high or low? Classic issue similarly is between efficiency versus exclusion. Internal systems of allocation to compensate for weaknesses or mechanisms to perpetuate monopolies and other attributes.

Data Issues. Several problems: Using Nominal rather than Real. Using Growth Rates over different periods. Failure to add in imports in market shares and concentration ratios. Still too aggregated.

Methodology To Be serious about attributing changes to causes we need controls. They do one test which looks at impacts of liberalization, FDI and trade liberalization in sectors that were affected. But all three are compared over the same period and the technique is simply to compare before and after using industries particularly affected. Need to control for other changes. Do have data on tariffs and should be used as independent variable.

Results Actually More Change

Shares in Assets in Manufacturing

Summary Needs a theory. Data needs reworking. Methodology Needs to test with controls. Interpretation. Perhaps more change in shares than they interpret. But this data base and the work they have done is a useful first step.