India After 20 Years

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Draft January, 2007 INDIA’s GROWTH: PAST AND FUTURE by Shankar Acharya* * Honorary Professor and Member Board of Governors, Indian Council for Research on International Economic Relations (ICRIER) Paper for presentation at the Eighth Annual Global Development Conference of the Global Development Network, January 14-16, Beijing. 0 India’s Growth: Past and Future By Shankar Acharya1 This paper is divided into five sections. Section I briefly reviews India’s growth performance since 1950 and indicates a few salient features and turning points. Section II discusses some of the major drivers of India’s current growth momentum (which has averaged 8 percent in the last 3 years) and raised widespread expectations (at least, in India) that…show more content…
This acceleration was due to a number of factors, including: the early efforts at industrial and trade liberalization and tax reform dur ing the 1980s, a step- up in public investment, better agricultural performance and an increasingly expansionist (almost profligate!) fiscal policy. Fiscal controls weakened and deficits mounted and spilled over to the external sector, requiring growing recourse to external borrowing on commercial terms. Against a background of a low export/GDP ratio, rising trade and current account deficits and a deteriorating external debt profile, the 1990 Gulf War and consequent oil price spike tipped India’s balance of payments into crisis in 1990/91. Although the policy reforms of the 1980s were modest in comparison to those undertaken in the ensuing decade, their productivity “bang for the buck” seems to have been high (see Table 4) 2 . Perhaps this 2 Several different factor productivity studies support this conclusion, including: Acharya-Ahluwalia Krishna-Patnaik (2003), Bosworth and Collins (2003) and Virmani (2004). 3 w as a case of modest improvements in a highly distorted policy environment yielding significant gains. Table 4: Growth of GDP, Total Factor Input and Total Factor Productivity
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