What 2014 won't change
- Mali hostage crisis ends as security forces gun down militants; 27 killed
- Sheena Bora case: Peter charged with murder, criminal conspiracy
- Nitish Kumar sworn in as Bihar Chief Minister; Lalu's sons in Cabinet
- UP keeps its distance from Bihar: Why Mulayam, Akhilesh didn't attend Nitish swearing-in
- Madras HC stays cancellation of Greenpeace India registration
There are no more stroke-of-the-pen economic reforms, no shortcuts
That a change in government in 2014 will bring back the higher rate of GDP growth that we experienced a few years ago is an increasingly popular view. While there may be an upturn in exports, due to the recent depreciation of the rupee and the pick up in the US economy, and some improvement in domestic investment, sustaining a high rate of growth requires longer-term solutions. These solutions are not difficult, but could take some time to put in place. In the meanwhile, GDP growth may still pick up a little in 2014-15. There are two components of the slowdown: the trend growth rate and business cycle conditions. While the business cycle conditions may improve in the coming months, the trend growth rate remains a problem.
Has India's trend growth rate slowed down? Long-term trend growth rates of economies, such as a 30-year average growth rate, have been one of the least understood and most unpredictable variables in the field of economics. The accumulation of capital, human capital, institutions, rule of law, infrastructure, political systems, and productivity growth change in ways little understood by economists even today. Their impact on long-term growth remains even less understood.
Scandals in the allocation of spectrum, coal blocks and land, and projects that have been stalled due to environmental clearances have certainly worsened the medium-term growth rate. But if these factors affect the long-term trend it implies that India does not have the institutions it needs to solve these problems. Despite all the gloom and doom, this is a view that is hard to find. One of the characteristics of Indian democracy is that even though it takes time to build the state's capacity, which is one of the biggest challenges that needs to be surmounted in order to deal with the issues of the day, it is not impossible to do so.
- Modi can leverage foreign policy to repair his domestic image
- Muslims biggest losers from our reservation policy, one that Bhagwat rightly wants reviewed
- If Pak state really cared for its people, it would put national economy above all else
- Despite little coverage in India, the Argentinian presidential election is significant
- Uday lacks a strong, accessible monitoring mechanism critical for its success
- What Mr Mani Shankar Aiyar won’t say