‘India can become an economic giant’: Panagariya

‘India can become an economic giant’: Panagariya
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First Published: Mon, May 12 2008. 05 09 PM IST

Author: Arvind Panagariya. Photo: Ramesh Pathan/ Mint)
Author: Arvind Panagariya. Photo: Ramesh Pathan/ Mint)
Updated: Mon, May 12 2008. 05 09 PM IST
New Delhi: Here is one economist who is still upbeat on the potential of the Indian economy despite the worries about inflation, a slowing national and global economy and other global crisis like the subprime meltdown and the credit crunch.
Meet Professor of economics at Columbia University, New York, Arvind Panagariya. He describes his book, “India: The Emerging Giant” as being on the Kelkar side of view of the Indian economy. That is, he believes that an eight to nine per cent GDP growth is sustainable for India unlike the other view that thinks that the growth will come off going forward.
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Book discussion: India: The Emerging Giant
He agrees that the pace of reforms has slowed down and concedes that if this was not the case, the Indian rate of growth for GDP could have touched the same rate as it for China at 10-11%. “Already, if one takes growth in real dollar terms and not nominal rate as we do now, India is already growing at a rate of 15%,” he says.
Author: Arvind Panagariya. Photo: Ramesh Pathan/ Mint)
On inflation, the professor believes that it will be contained going forward and is a short-term phenomenon. He argues that the Indian saving rate has only increased with time from 25% to 35% while corporate savings have been rising too. “This shows that there is enough scope for a rise in investment and growth rate,” he points out. Demographics is another advantage that facilitates Panagariya’s positive view. He reasons that there will be more and more people joining the working population as 50% of Indian population is under 20 years of age at the moment. While these people will add to overall growth they will also contribute to the savings ratio. Most of all, Panagariya is bowled over by the quality of Indian entrepreneurs. “That we had even 3-4% growth rate before 1991 was remarkable given the constraints entrepreneurs faced. We have world class business talent in India,” he says.
However, there are few challenges that India will need to overcome to become the giant that Panagariya believes it may one day. Increasing farmer income is one. India needs to make the shift from an agriculture-based economy to industrial economy that is labour intensive and provides alternate growth avenues to farmers, believes Panagariya. “China was able to migrate labour from agriculture to industries like toys, apparel, and other such small items. We need to do the same in India,” he says. Labour and power sector reforms are other imperatives that he insists on if India is indeed to become an economic giant.
He makes some other strong statements and raises many questions in his book. He insists that resistance of Left Parties has been a key reason for reforms slowing down and predicts that India will face a macro economic crisis in near future. More efficient intermediaries for saving, phased privatization of banks, a raise in the cap for foreign investment cap for insurance companies and reduction in custom duties for agri commodities are some other measures that he recommends in India the emerging giant.
India: The Emerging Giant, Publisher: Oxford University Press, Pages: 544 , Price: Rs775
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First Published: Mon, May 12 2008. 05 09 PM IST