Economic complexity as a determinant of the industrialization of countries: the case of India

We analyze how the complexity of economic systems has played a decisive role at the onset of the industrialization process of countries over the past 50 years (1963-2012). Our analysis of the input growth dynamics along the industrialization patterns, based on the “fitness” of a country, i.e. a recently introduced measure of economic complexity, reveals that more differentiated and complex economies face a lower barrier in terms of GDP per capita when starting the transition towards industrialization. Moreover, the separation of growth patterns between high and low fitness countries clearly shows a dramatic drop in growth due to inputs in high fitness countries when the industrialization has been achieved. In this way current industrialization theories are reconciled with empirical findings. We focus on the industrialization process in India and show that the economic complexity of the country increased between 1963 and 1987, when an impressive increase in GDP per capita marked the beginning of the transition towards industrialization. This process is still ongoing although it seems to have partly lost momentum over the past 4-5 years, as predicted by a decrease in the fitness value of the country