Is India’s ‘Tigrish Economy’ Under Threat?
Economists now tend to agree that India has begun to influence the world economy. That is why the annual ritual of the presentation of the country’s federal budget February end is viewed with great interest not only within India but also in the corridors of economic powers worldwide. The Indian Budget this year becomes important for yet another reason…By the end of 2008 the general elections would be held in the country.
The venerable British magazine The Economist year after year does a fairly good job of analyzing and making sense of the Indian budget that runs into reams and reams of paper, loaded onto trucks and presented in the Indian parliament for discussion and debate.
“In many ways India counts as one of liberalisation’s greatest success stories. For years, it pottered along, weighed down by the regulations that made up the licence raj, producing only a feeble ‘Hindu’ rate of growth. But over the past 15 years it has been transformed into a far more powerful beast. Its companies have become worldbeaters. Without India’s strength, the world economy would have had far less to boast about.
“Sadly, this achievement is more fragile than it looks. Many things restrain India’s economy, from a government that depends on Communist support to the caste system, power cuts and rigid labour laws. But an enduring constraint is even more awkward: a state that makes a big claim on a poor country’s resources but then uses them badly.”
Another major hurdle, says the magazine, is the hulking bureaucracy. “It is not unusual for a country’s bureaucrats and politicians to be less efficient than its businesspeople; and …India’s 10m-strong civil service is the size of a small country, and its unreformed public sector is a huge barrier to two things a growing population needs. The first is a faster rate of sustainable growth: the government’s debts and its infrastructure failings set a lower-than-necessary speed-limit for the economy. The second is to spread the fruits of a growing economy to India’s poor.
“By the government’s own admission, most development spending fails to reach its intended recipients. This is bound to stir up resentment—and risks causing a backlash against business.’