- The Indian economy has accumulated development experience spanning a little over six decades. There are some deep changes that have taken place in India, which suggest that the economy’s fundamentals are strong.
- The current rate of savings and investment have reached levels that even ten years ago would have been dismissed as a pipedream for India. On this important dimension, India is now completely a part of the world’s fast-growing economies. Since these indicators are some of the strongest correlates of growth and do not fluctuate wildly, they speak very well for India’s medium-term growth prospects. It also has to be kept in mind that as the demographic dividend begins to pay off in India, with the working age-group population rising disproportionately over the next two decades, the savings rate is likely to rise further.
- The arrival of India’s corporations in the global market place and informal indicators of the sophisticated corporate culture that many of these companies exhibit also land to the optimistic prognosis for the economy in the medium to long run. In the medium term, it is reasonable to expect that the economy will go back to the robust growth path. To begin with, there has been a revival in investment and private consumption demand.
- India’s exports have recorded impressive growth. Further, infrastructure services, including railway transport, power, telecommunications and, more recently but to a lesser extent, civil aviation, have shown a remarkable turnaround. The favourable capital market conditions with improvement in capital flows and business sentiments, as per the RBI’s business expectations survey, are also encouraging.
- Finally, and even though it is too early to tell if this is a trend, the manufacturing sector has been showing a buoyancy rarely seen before. There is also a substantial pick-up in corporate earnings and profit margins. Over the last half decade or so, India has shown that it can withstand the worst economic recession to have tested the world since the 1930s. It also aptly justifies the remark, made in somewhat different context, that “The Blue Billion Rises”.
There are certain critical lessons to be learnt from the sixty years of development experience:
- Macro-economic stability is an essential prerequisite for achieving the growth needed for development.
- Growth does not trickle down; development must address human needs directly.
- No one policy will trigger development – a comprehensive approach is needed.
- Institutions matter, sustained development should be rooted in processes that are socially inclusive and responsive to changing circumstances.