Gulzar has a presented a short summary of the structural issues with the Indian Economy here. This is what he says on the topic.
we had highlighted India's chronic human, financial, physical, and institutional capital deficiencies which holds the country back from realising sustained high growth rates.
In other words, in all these three, Indian economy has made little progress since 2007-08. In fact, it is clear that it did not recover from the crisis. The subsequent growth was not built on any sustainable foundation. In contrast, the growth spurt till 2007-08 appears to have been built on some solid financial capital foundations. A structural break appears to have occurred at the turn of the millennium, which moved the country into a high potential growth trajectory. The reforms undertaken by the government in 1999-2004 are an under-appreciated factor.
We have not been able to reach economic growth as seen in 2007-08. Lack of adequate reforms is the stated reason by many political commentators. Things have been made worse for the country by the downturn in the global economy.
The question is, what should have been done to spur growth? Would the economy have responded to these reform moves in the desired manner? Would the costs of such reform be adequately compensated by the ‘gains’, assuming that they were realized? Why do we speak of big-ticket reforms only? The assumption is that such big-ticket reforms, whose benefits would flow to large corporates directly, are beneficial to the country as the topline grows? Why is that we do not discuss distributive aspects of economic growth in the same breath? Why is that we do not see any discussion on how to foster growth of our MSMEs? Why are we not speaking of improving ease of doing business as more important to promoting Indian industry and businesses? Why are we only focused on country level issues and not about numerous hurdles to economic activity at local level? Why are we bothered only about growth and not about the gini coefficient? Is it ok to sacrifice the country’s businesses and the country’s poor at the altar of so-called structural reforms, which seem to be far removed from most businesses in India.
Are the banks there to serve the rich and already existing businesses? Why is it that Banks we see regularly run into issues of NPAs? Why do Banks participate in Evergreening of bad loans given to the rich till such a time that they beyond redemption? Why is it that Banks throw the book at small businesses while they lend egregious amounts to the super-rich from whom they are unable to recover?
Many economic thinker and policy makers want to tell us that the country and we will benefit very much if large structural reforms to invite FDI are taken up? I am unable to see a direct link between the so called reforms in FDI and the growth in economy. Have interested parties made concurrent occurrence of reforms and growth appear to be correlation in order to push more of the same?
Why are we prioritizing growth? Growth does not seem to affect most of the country’s population beneficially. Only a patriotic feeling that the country is ‘Developing’ makes us happy with ‘growth’. We see a lot of protectionist barriers come up in the Developed world. We need to look at growth which affects a good number of our countrymen positively. Don’t we need to talk to Indian businesses, small and big to see what they need in order to do better and be competitive in the world?
I feel we need to redefine what we hope to achieve in terms of economic growth including its distributive aspects. Fundamentally, we should make it easy for our businesses to function with the protection of rule of law to meet these agreed objectives. I say this, as large investments have rarely increased employment opportunities proportionately. We cannot hope the people would find something to do and do little about it. All planning should prominently include elements of how people would be affected and should be less focused on some topline number.
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