R. Gopalakrishnan

R. Gopalakrishnan

India and Tata
National Development and the Corporation

A fundamental characteristic of entrepreneurship is its capacity to generate
employment, offer the promise of more income, and increase wealth. By doing so,
it plays a pivotal part in providing individuals with a platform from where they can
aspire to a life in which their potential is realized. Over time, much of the devel-
oped world has risen to the challenge of crafting just such a platform, and the busi-
ness corporation as we know it today has been a critical component of this idea of
advancement. For those of us in the developing world—in particular governments,
businesses, and the people who drive them—the goal is clear: address inequities
not in some sapless, trickle-down manner, but rather by creating economic spaces
and providing resources to kindle a spirit of entrepreneurship that lifts people col-
lectively.

Andy Warhol, the American artist, probably got it right when he said, “Being
good in business is the most fascinating kind of art…. Making money is art and
working is art, and good business is the best art.” If art it is, then it must be pro-
gressive business, fueled by a psychological optimism that a better universe is pos-
sible if we can bring our talents to bear on the task of overcoming the barriers in
our path. This is particularly difficult to accomplish in countries such as India,
where the burden of history and the inequities bred by tradition have conspired to
leave large portions of the land mired in poverty. Corporations and business hous-
es have a different role to play in India, one with more obligations and nuances
attached, than in nations where economic well-being has already been achieved.
The business community carries the responsibility to be socially responsive, to

R. Gopalakrishnan is executive director of Tata Sons, chairman of Rallis India and of
Advinus Therapeutics, and vice chairman of Tata Chemicals. He is a director on the
boards of several Tata companies, among them Tata Motors, Tata Power, and Tata
Teleservices. Mr. Gopalakrishnan joined Tata Sons in September 1998 after 31 years
with Hindustan Lever. He has been president of the All India Management
Association, and is author of The Case of the Bonsai Manager, published by Penguin
India in 2007.

© 2009 R. Gopalakrishnan
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R. Gopalakrishnan

engender jobs and livelihoods, and to be more than profit-spewing monoliths
answerable only to shareholders.

The struggles India faces are many, but the country has significant advantages,
too. It is among the world’s emerging economies, which together represent 80 per-
cent of the global population. India is experiencing growth on a scale not seen pre-
viously. To accelerate this growth, we need to encourage business enterprise, and
for that to happen we need to find a way to harness the entrepreneurial capability
that resides within us, not quite dormant but certainly undervalued. An enterpris-
ing community is defined by an outward-looking attitude, by a willingness to
explore new ideas as well as to accept exogenous influences. These qualities have
been evident in Indian history throughout the centuries.

A HISTORY OF OPENNESS

Merchants from Mohenjodaro and Harappa were trading with Sumeria as early as
2300 BC. The world’s first university was established in 700 BC at Takshila, where
60 subjects were taught to 10,500 students from across the world. On the east coast
of southern India, so many Roman coins from the first century have been found
that it seems the balance of trade during the period favored India. In 1498, Vasco
da Gama noted that Calicut was already a thriving port city familiar to Arab and
Chinese merchants. In 1608, an English captain named William Hawkins dropped
anchor at Surat. Armed with 25,000 pieces of gold and a letter from King James I
to Mughal emperor Jehangir, he travelled to Delhi and wrote in his tour report,
“Nothing that England makes at this time is really desired by Indian merchants or
officials.”

Robert Clive, whose victory at Plassey in 1757 strengthened England’s control
of colonial India, was investigated by the British Parliament for personal enrich-
ment during his years in the country. In his defense, Clive said, with feigned humil-
ity, “I walked through vaults which were thrown open to me alone, piled on either
hand with gold and jewels! Mr Chairman, at this moment I stand astonished at my
own moderation.”1 In more modern times we have the countless success stories of
the 20 million–strong Indian diaspora—enterprising migrants who voyaged from
the Hindi heartland to the West Indies, from Tamil Nadu to Sri Lanka and
Malaysia, from Gujarat to Africa, from Kerala to West Asia, and from Sindh and
Punjab to everywhere.

India is fortunate in that it was never cut off from global influences during its
long history, unlike a few of her Asian neighbors. For several centuries between
1500 and 1800 AD, countries such as Japan, Korea, and China experienced com-
plete isolation from the rest of the world. As late as the 1920s, India was ranked
fourth in world trade, with a market share of 2.5 percent (it is less than 1 percent
now). What followed was a downward spiral, the blame for which cannot be
pinned entirely on the degradations of colonialism.

During the first few decades of an independent India, central planning and
socialist policies frustrated the natural entrepreneur. But that centuries-old DNA

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India and Tata: National Development and the Corporation

of entrepreneurship and restlessness would not be suppressed. The liberalization
of the Indian economy, a process that began in the 1980s under Indira Gandhi, has
triggered the nation’s release from a state of passivity. Indian businessmen are once
again in a mood to do busi-
ness with the world, and the
world, in turn, is just as keen
to do business with India. Up
until the 1980s, it was impos-
sible to find global consult-
ants operating
in India.
Today, McKinsey’s operation
in India is among its more
successful practices outside
of
the United States and
Europe. Boston Consulting
Group, A. T. Kearney,
Accenture, and several others
have also entrenched them-
selves in the country, serving
clients hungry to cut costs,
improve margins,
and
become competitive.

During the first few decades of
an independent India, central
planning and socialist policies
frustrated the natural
entrepreneur. But that centuries-
old DNA of entrepreneurship
and restlessness would not be
suppressed. The liberalization of
the Indian economy, a process
that began in the 1980s under
Indira Gandhi, has triggered the
nation’s release from a state of
passivity. Indian businessmen
are once again in a mood to do
business with the world, and the
world, in turn, is just as keen to
do business with India.

Entrepreneurial behavior
is contagious; it produces a
herd mentality, a bit like
gold prospecting. It has been
observed
that knowledge
industries emerge through
“idea entrepreneurs,” such as
consultants, journalists, and
scholars.2 These entrepre-
neurs may not establish new
themselves,
organizations
but they do create new ideas,
new industry segments, or entirely new markets. Thus, some 25 years ago, Texas
Instruments first set up a global R&D center in India, and several others have fol-
lowed that lead. Today there are more than 100 global R&D centers in Bangalore
alone.

DEMOCRACY’S CHILDREN

One of India’s enduring strengths is its democratic system. It is not the prettiest
kind of democracy, nor does it have an automatic remedy for a multitude of ills,
yet India has done an astonishing job of containing, in a continent-sized country,

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R. Gopalakrishnan

the tensions of ethnic, religious, regional, social, and economic differences. These
accomplishments, however, pale before the problems confronting us.

India’s GDP growth during the last 15 years has, it is estimated, lifted about 250
million people from abject poverty. Despite this, its per capita GDP sits on the
same level as that of the Ivory Coast and Lesotho. The renaissance of the Indian
economy has been driven by the
deregulation of the organized
sector, which operates in the
larger urban centers. But the 800
“Little
million people of
small
India”—the
towns and villages with a popu-
lation of
less than 50,000—
remain in the clutches of a cen-
tralized and bureaucratic sys-
tem.

600,000

In the 60 years since
independence, the Indian
nation has experimented with
many approaches to spreading
prosperity, but we need better
results. It is time to liberate
India by empowering people
and promoting more local
governance. That is the best
way to spread prosperity to
larger sections of our
population because it will
unleash the natural enterprise
of our people.

The troubles plaguing the
denizens of Little India are
many. Here are some of them:
• Between 1980 and 2000, the
per capita income of the Indian
workforce that is dependent on
agriculture was about flat.
• The urban per capita income
in India was 2.3 times its rural
per capita income in 1993-94.
By 1999-2000, the ratio had
widened to 2.8.
• One-third of India’s 650 mil-
lion rural habitants live in offi-
cially declared “non-electrified
villages,” one-third in “villages

with some electricity,” and a further one-third in “villages with intermittent
electricity.”

• In spite of the existence of at least 2,000 programs for rural development, a
survey of 400 villages in Karnataka state revealed that 40 percent of the vil-
lagers said that they had never heard of a single government program.3

• In 2007, the chairman of the country’s National Commission for Enterprises in
the Unorganized Sector stated that “three-fourths of India’s population has
indeed been bypassed by the high rate of economic growth.”

• By the Indian government’s own admission, there is a state of lawlessness in

about 150-165 districts spread over 12-14 of the country’s states.

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India and Tata: National Development and the Corporation

• The World Bank has noted that it takes 425 to 1,165 days, depending on the

state, to enforce a contract in Indian courts.

In the 60 years since independence, the Indian nation has experimented with
many approaches to spreading prosperity, but we need better results. It is time to
liberate India by empowering people and promoting more local governance. That
is the best way to spread prosperity to larger sections of our population because it
will unleash the natural enterprise of our people. We tend to see enterprise pre-
dominantly through an economic lens, but it also has a social and behavioral
dimension: an action may be considered enterprising in one type of society but not
in another. For instance, the opening of a teashop by a person from a tribal com-
munity in India may be considered enterprising in his immediate social circle, but
the same rules may not apply to a trading community.4

THE DYNAMICS OF INDIAN ENTERPRISE

Enterprise is a creative and innovative response to the environment. David
McClelland established the now widely accepted view that enterprise is promoted
by a high-achievement orientation that can be promoted by enriching people’s
thinking and fantasy world with achievement language. Four factors influence
entrepreneurship: the experiences of an individual; the traditions of the family and
the society in which he lives; the support systems of finance, vocational training,
and extension services; and a supporting and mentoring governmental policy
framework.

In the 1960s, there was considerable interest in achieving rapid economic
development through small enterprise all over the world. In India, the Small
Industry Extension Training Institute was established, and it has done plenty of
good work over the decades. But now there are multiple government agencies in
India trying to do the same thing. These agencies have become bureaucratized and
lethargic when what is needed is purposeful effort to promote enterprise in small
towns and villages. This is a development that undermines the valuable gene of
Indian enterprise, which has prospered through invasions, battles, and colonial-
ism. This gene has required periodic refreshment but has never had to be resur-
rected. It is an asset that needs sustenance, not bureaucratic negation.

C. Rajagopalachari, one of independent India’s founding fathers and an erudite
statesman, wrote, “There have been a great many periods [in India] during which
the people had neither central nor regional governments exercising effective
authority. All these periods of what may be called a no-government condition
could not possibly have been tided over but for the self-restraints imposed by our
culture.” The gene of enterprise prospered for centuries under a governmentless
dispensation in which small communities managed their interests locally. In terms
of governance, India has for the most part been a multiplicity of village communi-
ties.

A centralized bureaucratic setup was always a rarity in India and power was
not embodied in the concept of the state. Leaders ruled by capturing the symbol-

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R. Gopalakrishnan

ic seat of power and they extracted taxes rather than fundamentally changing the
societies in their kingdom. As Charles Metcalfe observed in 1838, “The village
communities seem to last when nothing else lasts. Dynasty after dynasty tumbles
down; revolution succeeds revolu-
tion; Hindu, Pathan, Mughal,
Maratha, Sikh, English are masters
in turn, but the village communi-
ties remain the same.”5 Indian soci-
ety always carried on, somewhat
unmindful of who was ruling and
collecting taxes.

Four factors influence
entrepreneurship: the
experiences of an individual;
the traditions of the family
and the society in which he
lives; the support systems of
finance, vocational training,
and extension services; and a
supporting and mentoring
governmental policy
framework.

Around the time of the Mughal
emperor Aurangzeb, India was not
an integrated market for goods and
services but a conglomerate of
regional markets.6 This was mainly
due to three reasons: an underde-
veloped road and river system, the
danger of being looted while mov-
ing goods across the country, and
the levy of a customs taxes at mul-
tiple points during the transit of
goods. At the time of independ-
ence, in addition to colonial India
there were more than 500 princely
states, the larger ones even having their own currency, stamps, and railways. In the
words of one observer, some of these states were “sinks of reaction and incompe-
tence and unrestrained autocratic power sometimes exercised by vicious and
deranged individuals.”7 The integration of India is a staggering achievement that
modern Indians have almost forgotten. Just 60 years ago we were not one country
but 500, and 300 years back we were an agglomeration of multiple village commu-
nities.

CENTRALIZATION VERSUS DECENTRALIZATION

When the Indian constitution was being developed in the 1940s, there was consid-
erable debate on the issue of centralization. The constitution ended up leaning
toward centralization, which was an adaptation of Western principles to suit our
situation, and for which the colonial-era system was already in place. In fiscal mat-
ters in particular, the effects of such a move were feared to be deleterious. Leaders
such as K. Santhanam argued that centralization would make India’s states “beg-
gars at the door of the Centre.” It turns out that he was right.

The constitution was amended in 1993, making it mandatory to elect village
panchayat (council) leaders every five years, one-third of whom have to be women.

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India and Tata: National Development and the Corporation

This means that some three million legislators are elected in India every five years,
a gargantuan democratic feat unparalleled in the world. However, the village pan-
chayats have little flexibility in raising funds, and that has kept the decentralization
issue on the boil. The various public-utility schemes run by the government are
not entirely useless, but corruption and inefficiency have taken a heavy toll and the
situation looks unlikely to change in the foreseeable future.

The solution lies in making the most of the natural spirit of enterprise in
India’s people. Intuitively, this seems like a worthy approach, but despite legislation
and public pronouncements to delegate power to the community, our system has
found it difficult to do so. There is certainly a debate to be had on the fallouts of
decentralization: Are the people capable? Can they take care of their self-interests?
Will local “lords” spirit away public money? These are valid concerns, but by
indulging excessively in them we miss the woods for the trees.

The intellectuals and bureaucrats of urban India are intrinsically interested in
subjects like organized industry, foreign investment, and stock markets. Under
these circumstances, Little India’s economic growth gets relegated to the margins.
Something has to give. To paraphrase John Maynard Keynes, I hope India does the
rational thing here, since the alternatives have been tried and discarded.

THE TATA EXPERIENCE

A good example in this context would be the efforts of Tata BP Solar, a joint ven-
ture company that makes and markets solar panels. Apart from its green creden-
tials, solar power in villages has three benefits: delivering access to electricity, gen-
erating direct employment (through installation and maintenance work and the
collection of charges), and indirect employment (through fabrication shops, out-
lets to sell solar-powered devices, storage, transport, etc.). Tata BP Solar estimates
that about 700 people could be employed for every megawatt (MW) of solar power
produced. Even if only 5,000 MW were to come from solar power, the direct and
indirect employment potential for Little India could be 3.5 million jobs.

Another example comes from the work that the community-initiatives cell of
Tata Chemicals8 did in collaboration with the International Centre for
Entrepreneurship and Career Development (ICECD), which has been recognized
as a center of excellence by the United Nations. The ICECD project involved train-
ing over 10,000 people, who in turn developed the enterprise capabilities of thou-
sands. The focus was to promote enterprise, particularly among women. Using the
training imparted by ICECD to its staff, the Tata Chemicals cell conducted a sort
of rural MBA program in the 42 villages around two of its main facilities in India.
Among the lessons learned were that local government officials can become a
threat to successful entrepreneurs; the role of societal traditions determines who
can do what (in one place enterprise was perceived positively, in another caste
became a constraining factor); and the need for a facilitating information center is
crucial.

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R. Gopalakrishnan

A similar example is an enterprise-promoting initiative in Bengal. The Tata
Group partnered with Anand Bazar Patrika, the largest-selling Bengali newspaper
in India, to get young people to undertake entrepreneurship projects. Called Nijer
Paye Darao (stand on your own feet), the campaign, which got off the ground in
December 2007, involves bimonthly publishing of editorial content that encour-
ages entrepreneurship. The content includes articles about the Tata Group’s
endeavors, success stories of local entrepreneurs, advice on how to get started in
business, and answers to questions from readers. Future plans include a contest in
which budding entrepreneurs will be asked to submit their business ideas, which
will be evaluated by a panel of experts. The best ideas will be supported with fund-
ing leads, and the people generating them will be given the opportunity to attend
an entrepreneurship training program.

For evidence that the “other India” can make good on its promise, look no fur-
ther than industrialized and urbanized India, a land in which the animal spirits of
the private sector were unleashed. Economists Dani Rodrik and Arvind
Subramanian explain this unleashing through certain elements, the most impor-
tant being an attitudinal change on the part of the government and a shift to pro-
business policies.9 Additionally, there was a change in mindset around 1980, after
many decades of heavy-handed regulation, when an entrepreneurial spirit found
the wings to soar.

FINDING THE RIGHT BALANCE

Entrepreneurship alone can never be enough in a nation like India; it has to walk
hand in hand with a commitment to community and country. This demands a
mindset that makes space for social responsibilities that are rendered as compre-
hensively as possible. A cogent example of how such a two-pronged approach—
entrepreneurial success balanced by societal obligations—can be found in the way
the Tata Group, one of India’s biggest and most respected business conglomerates,
has conducted itself.

If there is one attribute common to every Tata enterprise, it is the time, effort,
and resources each of them devotes to the wide spectrum of initiatives that come
under the canopy of social development. The Tata culture in this critical segment
of the overall corporate social responsibility matrix springs from an ingrained
sense of giving back to society. Since the earliest days of the group’s history, the
Tata tradition in community development has been defined by the values embed-
ded in its core. It never was charity for its own sake or, as group founder Jamsetji
Tata put it, “patchwork philanthropy.”

Reinforcing the implicit beliefs the group brings to its mission of sustainable
development is an explicit set of structures, embodied most notably by the Tata
Council for Community Initiatives (TCCI). A centrally administered agency that
helps Tata companies through specific processes, TCCI’s charter embraces social
development, environmental management, biodiversity restoration, and employee
volunteering. This organization coordinates the varied and widespread communi-

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India and Tata: National Development and the Corporation

ty development activities of the Tata companies. TCCI has, in collaboration with
the United Nations Development Programme (India), crafted the Tata Index for
Sustainable Human Development, a pioneering effort aimed at directing, measur-
ing, and enhancing the com-
munity work that the Tata
enterprises undertake.

Entrepreneurship alone can
never be enough in a nation
like India; it has to walk hand
in hand with a commitment to
community and country. This
demands a mindset that makes
space for social responsibilities
that are rendered as
comprehensively as possible.

No matter how elaborate,
systems and processes cannot
really capture the magnitude
and dispersion of all that the
Tata Group does in the field of
community
development.
From health and education to
livelihoods and women’s and
children’s welfare, the commu-
nity work being undertaken by
Tata companies touches a mul-
titude of Indians across the
land. A different dimension of
this social development doc-
trine shines through in the Tata
support and backing that enriches the country’s cultural and sporting spheres. In
the field of art, this support has played a critical part in preserving and promoting
every component of India’s cultural heritage. Tata backing of sports has unfolded
in the form of academies for a variety of sporting disciplines and the sponsorship
of talented individuals.

The bigger entities in the group, such as Tata Steel and Tata Chemicals, have in-

house organizations dedicated to the task of social uplift:
• The Tata Chemicals Society for Rural Development (TCSRD) was established
in 1980 to promote community welfare in and around its facilities in western
and central India. The society works to protect and nurture the rural popula-
tions in these areas and helps people achieve self-sufficiency in natural resource
management, livelihood support, and the building of health and education
infrastructure. Through TCSRD, Tata Chemicals works to improve the quality
of life of the people and communities around its operations, and to support
sustainable development—a theme that is central to the company’s corporate
philosophy.

• The Tata Steel Rural Development Society (TSRDS), set up in 1979, is involved
in various social development programs aimed at helping the rural communi-
ties living around Tata Steel’s operational units in eastern India. Before the
establishment of TSRDS, Tata Steel’s community initiatives were conducted
through its rural and community services division. However, the fundamental
differences between the imperatives of rural and urban development prompted

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R. Gopalakrishnan

the company to reclassify its community initiatives programs under three
units: Community Development and Social Welfare, TSRDS, and the Adivasi
and Harijan Welfare Cell, now known as the Tribal Cultural Society.

• Tata Tea, Rallis, Voltas, Tata Power, Tata Consultancy Services, and Titan, along
with a host of smaller Tata enterprises, devote considerable resources to com-
munity initiatives in spheres such as education, health, livelihoods, environ-
ment, tribal development, and women’s and children’s welfare. Much of this
work happens while receiving little or no publicity.

A FIGHTING CHANCE FOR THE FUTURE

As Aristotle noted, even God cannot change the past, but the future is there to be
made. That wisdom can be witnessed in today’s India. Unlike the generations
before them, young Indians are
no longer obsessed with the
country’s poverty but with its
future. This gives us a fighting
chance. India will never be a tiger
because it is built in the mold of
an elephant, therefore it will be
persistent and enduring rather
than flashy.

An ethical and conciliatory
approach to business
underpins the expansion
agenda the Tata Group has
pursued in the 140 years of
its existence. Putting people
over profits and remaining
rooted to the milieu that
created it has benefited the
Tata Group as much as those
whose lives it has touched.

The sheer adventure and
scale of India’s economic growth,
with social justice and entrepre-
neurship as its pillars, is stagger-
ing. There are beauty spots in this
model and there are warts and
moles, too. But this much is
beyond doubt: no experiment of
balancing growth, entrepreneur-
ship, and social justice has been
undertaken in human history by
any country on such a large can-
vas. Over the coming decades,
India has a real chance of reclaiming its place at the top table in the league of
nations, a position she held for centuries but lost over the last few hundred years.
Business houses have a vital responsibility to fulfill if India is to make the tran-
sition from underachiever to high-flier. Are they up to the task? Integrity, fortitude,
and an enduring commitment to country and community have marked the Tata
Group’s rise to prominence. These qualities have on occasion disadvantaged some
Tata enterprises, but they have, in the long run, been the cornerstones of a business
philosophy that has delivered success on a grand scale. Just as importantly, they

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India and Tata: National Development and the Corporation

have helped the group secure the good will and trust of investors, governments,
associates, and everyday folks.

An ethical and conciliatory approach to business underpins the expansion
agenda the Tata Group has pursued in the 140 years of its existence. Putting peo-
ple over profits and remaining rooted to the milieu that created it has benefited the
Tata Group as much as those whose lives it has touched. The accumulation of
wealth and glory by individuals is not in the Tata DNA. That’s one reason why no
Tata shows up on any of those ritual listings of India’s richest people. This repre-
sents a unique business ethos, one in which 65.8 percent of the shares of Tata Sons,
the holding company of the group, are controlled by trusts. These trusts, estab-
lished by members of the Tata family, support a wide variety of causes, institutions,
and individuals. What the Tata trusts do is separate from the earlier mentioned
community-support initiatives of individual Tata companies.

Sustainable and socially conscious business practices are not a Tata preserve.
There are many enterprises, in India and elsewhere, that put a premium on blend-
ing growth with a commitment to society. That’s an attribute that won’t count for
much in an annual report, yet is invaluable in the development of a country and
its people.

1. Archie Baron, An Indian Affair: From Riches to Raj, London: Sidgwick & Jackson, 2001.
2. C. B. Schoonhaven and E. Romanelli, The Entrepreneurship Dynamic, Stanford: Stanford

University Press, 2001.

3. The World Bank, Fiscal Decentralization to Rural Governments in India, New York: Oxford

University Press USA, 2004.

4. Udai Pareek and T. V. Rao, Developing Entrepreneurship, New Delhi: Learning Systems, 1978.
5. Charles Metcalfe, 1st Baron Metcalfe, was the acting Governor-General of India (1835–1836). His
correspondence is quoted in Romesh Chunder Dutt, The Economic History of British India: A
Record of Agriculture and Land Settlements, Trade and Manufacturing Industries, Finance and
Administration, from the Rise of the British Power in 1757 to the Accession of Queen Victoria in 1837,
K. Paul, Trench, Trübner & Co., Ltd., 1902, p. 308.

6. Dwijendra Tripathi, The Oxford History of Indian Business, Oxford: Oxford University Press, 2004.
7. Ramchandra Guha, India after Gandhi, London: Macmillan, 2007.
8. Alka Talwar, Rural Enterprise Development Programme, New Delhi: Tata Chemicals, 2006.
9. Dani Rodrik and Arvind Subramanian, “‘Hindu Growth’ to Productivity Surge,” Cambridge, MA:
National Bureau of Economic Research (NBER) Working Paper Number 10376, 2004 (May).

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