Without new and sustained governmental reforms, India will not realize its economic growth goals or potential, according to a new policy report from Rice University's Baker Institute for Public Policy.
After being relatively unaffected by the global economic downturn and experiencing strong growth in the 1990s and early 2000s, India is undergoing a major slowdown because "the economy has overshot its support structure," said Russell Green, fellow in international economics at the Baker Institute and author of the paper "Limits of the Jugaad Growth Model: No Workaround to Good Governance for India."
"The government put reforms into place in the early '90s that made it possible for the private sector to grow," Green said. "But the government itself remained in the same semisocialist mode. It had allowed these private-sector reforms but the basic political leadership and basic political process have stayed the same."
The report cites lagging government services like education (India's adult literacy rate is 64 percent), energy systems and transportation as major issues facing the Indian people and private sector. "The road systems in India have been expanding but at too slow of a pace, and the rail system used today is basically the same now as in British times," Green said.
With India's finance minister presenting his annual budget this week, Green also spells out in the report near-term and deeper reforms that the Indian government should consider. The near-term reforms (summarized from the report) include:
Some of the deeper reforms include the judiciary, where there is currently a 30-million case backlog, bureaucracy, labor, education and land development. More information on all of the reforms can be found here.
Green also advocates for India to offer more of its government-run businesses to investors, foreign and domestic, where revenues from offerings could boost the economy and allow for free market enterprise to take hold. But he said that due to the current labor laws and union employment rules, this move will be difficult.
"India really has the potential to grow at a China-like double-digit pace," Green said. "However, that's not going to happen until the government gets its act together."
Related links:
Study: www.bakerinstitute.org/policyreport52
Russell Green bio: http://bakerinstitute.org/personnel/fellows-scholars/rgreen
Founded in 1993, the James A. Baker III Institute for Public Policy at Rice University in Houston ranks among the top 20 university-affiliated think tanks globally and top 30 think tanks in the United States. As a premier nonpartisan think tank, the institute sponsors more than 20 programs that conduct research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute's strong track record of achievement reflects the work of its endowed fellows and Rice University scholars. Learn more about the institute at www.bakerinstitute.org or on the institute's blog, http://blogs.chron.com/bakerblog .