India's Long-Term Growth Experience: Lessons and Prospects

India's Long-Term Growth Experience: Lessons and Prospects By Sadiq Ahmed SAGE Publications, New Delhi, 2007; Pages: 103; Price: Rs. 475 ISBN: 978-0-7619-3605-3 As a result of the rapid growth taking place in India since 1980, the country has transformed itself from the world's 50th ranked economy in nominal US dollars to the 12th largest in 2003. However, on the one hand when income is measured with regard to purchasing power parity, the Indian economy occupies the 4th place but on the other hand there is also enough evidence which indicates that income inequality is on the rise and the disparity in average per capita income between the rich and poor states is growing. Election results at the national and state level suggest that unless the issue of growing income and standard of living inequality is tackled upfront, there is a risk that the economic reform momentum unleashed might slow down. In this book, the author has primarily essayed two questions and proposed different ways to answer those questions. The first question is: What factors have allowed India to achieve rapid rates of growth so far? and the second question is: How can India sustain its growth momentum? The answers to these questions are based on the extensive blending of existing research in this area. Author argues that India's growth experience mainly comprises of two phases: phase I and phase II, phase I (1950-1980) was inward looking and relied mainly on a command and control type of environment whereas phase II (1980-2004) was outward oriented and mainly relied on market driven initiatives. It is during phase II when India witnessed high growth rates primarily due to a major shift in the development strategy and associated policies unleashed after 1980. The key reforms which were introduced included prudent macroeconomic management, exchange rate and trade liberalization, financial sector liberalization; and domestic investment deregulation which provided dramatic positive results as the economy became more open and competitive and private investment could expand. During the period of 2004-06, India already achieved the 8% growth rate target and this growth rate might be sustained due to a number of favorable factors such as: a growing labor force, a falling dependency ratio, rising savings and investment rates, expanded FDI associated with an increased technology transfer and a dynamic private sector. The book identifies ways in which investments can be improved to raise productivity and reduce the cost of doing business in India thereby promoting domestic and foreign private investment. The author also looks at the growth and productivity challenges of the agriculture sector and suggests policies that will help raise farmers' productivity and incomes. In addition, it explains the reason for the low overall employment elasticity of the past growth periods and why there has been limited expansion of good jobs suggesting critical reform requirements for an increasing employment rate. The chapter-wise summary of this book is presented below: * Chapter 1 discusses the main theme and builds up the base with regard to the context of India's long-term growth experience, opportunities and challenges. It presents various world development indicators to support the author's claims. * Chapter 2 examines the evolution and structure of India's long-term growth in relation to total and per capita GDP growth. It reviews the sectoral composition of growth rates for three broad sectors, namely agriculture, industry, and service sector, their employment issue and the state level context of each growth development. The author prescribes that in order to take care of the challenges associated with development those ways have to be identified which can contribute towards the acceleration of growth in the lagging regions rather than to abandon the acceleration in growth effort. …