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India: The Emerging Giant
Professor Arvind Panagariya and Dr. Rakesh Mohan shake hands on stage following the event in Mumbai on May 12, 2008. (Photo courtesy of Bombay Chamber of Commerce)
MUMBAI – Why did the early promise of the Indian economy not materialize and what led to its eventual turnaround? In conversation with Dr. Rakesh Mohan, deputy governor of the Reserve Bank of India, Columbia University Professor Arvind Panagariya offered an analysis of India's economy over the last fifty years--from the promising start in the 1950s, to the near debacle of the 1970s, to the phenomenal about face of the last two decades.
At this Asia Society India Centre event held at the Taj President Hotel, Professor Panagariya illuminated the ways that government policies have promoted economic growth, and discussed such key topics as poverty and inequality, tax reform, telecommunications, agriculture and transportation, and the government's role in health, education, and sanitation.
Professor Panagariya said that agricultural reform is needed in the short run in order to raise farmers’ income levels. In the long run, however, agricultural growth would not be able to grow fast enough -- even an increase from its current level of 2.5 percent to 4 or 5 percent would not be sufficient. What is needed is for people in the farming sector to be pulled away into non-farming, labor-intensive industries (such as production of apparel, footwear, consumer goods), where well-paying jobs can be created for many.
Reported by Angeline Thangaperakasam, Asia Society India Centre
Excerpt: On the Role of Agriculture in the Indian Economy and the Need for Market Reforms (5 min. 15 sec.)
Listen to Entire Program (1 hr., 9 min.)
Panagariya's success story is based on free trade and globalisation He focuses mainly on four points: (i) India will grow more than 10% (double digit), (ii) India will takeover china (obsession), (iii) globalisation and free-trade is good as it has taken off people from poverty, (iv) he accepted growth in manufacturing is irrelevant as we can trade it for services, etc.
However, (i) India failed to grow @10% let alone giving any forewarning about the 2008 global crises. Rather Indian economy witnessed a double digit inflation causing hardship to common man. (ii) China obsession prompted him to exaggerate growth to 11.5% using short lived PPP theory. His dream was further shattered when the govt revised its growth to 7.5%, (iii) in reality India's growth has been loop-sided therein major part of growth is attributed to uncertain financial sector, capital intensive goods and services. Agriculture sector is in shambles. This led to creation of two Indias: Rich and poor. He does not refer to increasing disparities and has not been forthright about the PBL to be 27% although govt accepted Prof Tendulker’s figure of 37%..
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