Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Friday, 30 August 2013

India and the Road To Be Taken

My latest column is out:

The lack of vision, an absence of ideals, and self-serving short-termism of the present government has come home to roost. When the world economy is in torpor, India too has sleepwalked into disaster. Understandably, the markets have not been kind to India, causing the neo-socialist durbar to pass one panic-stricken counterproductive short-term measure after another just to tide them over the next election. However, it is not only general political ineptitude and corruption that are to blame. The Indian malaise springs from other fundamental factors.

The state-directed development model imposed after Independence has resulted in an economy that looks modern but is more medieval. With more than two-thirds of the population in rural areas, one-quarter illiterate, and more than three-quarters employed in the informal sector, it is ludicrous to think pulling a few levers at the Reserve Bank of India (RBI) can sort out all problems. The appointment of Raghuram Rajan is laudable, but the ensuing media circus has diverted attention from the real issues. Neat monetary theories that are failing in the West are even more irrelevant in the Indian context. The way out of the woods requires three interrelated policy steps—land reform, promoting industrialization by deregulation, and building infrastructure.

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