Sustaining growth - Stanford prescriptions
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Just over a fortnight ago the Stanford Centre for International Development concluded its IXth Annual Conference on Indian economic policy reform. As in the past, it brought together a knowledgeable mix of academics, policymakers and corporate leaders. An extended flavour of this year's conference was a television programme, moderated by Barkha Dutt of NDTV, which fostered an interaction between a group of panelists who were speakers at the Stanford conference and a spectrum of students drawn from different countries on the broader issues of Indo-US relationship, the commonalities being encountered, and how India was being generally viewed in the United States. The conference itself debated several issues of relevance to our contemporary economic strategy. These ranged from fiscal policy and growth, labour market reforms, banking and financial sector changes, making growth more inclusive, improving business practises, and what generally was holding India back. Each one of the eight sessions during which these issues were deliberated on deserve a separate treatment.
Let me, however, comment briefly on one of these sessions, namely, Fiscal Policies and Growth in which Michael Boskin presented his prescription on the key parameters and lessons we need to keep in view. Anyway, this is a season for prescribing templates. We have scarcely gotten over the prescriptions of the Spence Commission on Growth, which contained a broadly acceptable list of do's and don'ts, fortunately avoiding any startling suggestion and seeking to strike a balance between what Dani Rodrik describes as market fundamentalism versus institutional fundamentalism. In that sense some of Boskins's prescriptions have immediate relevance for us. His eight lessons comprise making relative prices to reflect true scarcity values to the maximum extent possible; to subsidies only the lowest income people and not special groups of people; helping people invest in their own skills and futures incomes; keeping government in the economy as light as possible; making tax rates low and broad based; keeping ratio of public debt to GDP under control by limiting liabilities; applying rigorous social cost benefit tests to all spending and regulation decisions; aligning responsibilities and resources among levels of government namely, the states and finally, tolerating a measure of inequality during a phase of rapid economic development.