Thursday, November 17, 2016

The limits to India's growth?

I have a report (pdf here) with V Ananthanageswaran that explores the constraints that face India's economic growth and suggests a set of policy prescriptions and process principles going forward. 

The short story is that India faces acute capital deficiencies on multiple fronts as well as much under-appreciated adverse global structural headwinds which pose serious constraints to the achievement of sustainable high growth rates. High growth can be achieved only as episodes of over-heating followed by years of pain and lower growth from cleaning up the excesses. In the circumstances, the most prudent strategy may be to target a long period of moderate growth by focusing on steady economy-wide physical, human, and institutional capital accumulation and opportunistically riding on emergent global tailwinds.

Please read the whole report. Comments would be much appreciated. 


Tirumala KV said...

Must congratulate you and Ananth for the hard work. It rounds up the challenges well; and it must have taken unusual amount of labor to cover so many areas. Might add couple of things for your consideration:
In export led growth discussion, I feel we need to deliberate more upon our failure to integrate into global value chains. Not getting integrated into value chains originating from Asia (electronic hardware manufacturing especially) at right time made us a laggard in international trade.
Also, while you do touch upon factory automation, it appears that the effect is downplayed. Automation, in both manufacturing (robots) and services (IT automation, machine learning) are going to be the next big disrupters. Factories may be located anywhere, and labor based advantages might stop playing important role. India needs to think about this development seriously. Chinese are already ahead in this matter. I agree with all other points you have covered in that area.
The penultimate chapter on process principles appears too preachy (personal opinion though). For such a good report, you may want to make it tighter.
Great work sir. Enjoyed reading it from end to end.

Errata: Page 54. paragraph 4: You say 'section 13(1)(d)(iii) of the Right to Information Act assumes significance'. I think you mean 13 (1) of POC Act and not RTI act. You have got it right elsewhere in the report.

Gulzar Natarajan said...

Thanks Tirumala for reading and your comments. Thanks especially for pointing the mistake. Somehow that got through.

Yes, the automation bit was underplayed since this work was mostly completed last year and much of the interesting papers in the field started coming in early this year. I guess, laziness in incorporating it! But agree with you..

I am not sure about what can be done to "integrate to the global value chain". Can you think of specific actions in that regard? I am not certain...

About the process principles (or preaching), we think that is one of the more important parts. It is very very essential for our leadership to internalise that.