India: The Emerging Giant

India: The Emerging Giant

India: The Emerging Giant

India: The Emerging Giant

Synopsis

The subject of India's rapid growth in the past two decades has become a prominent focus in the public eye. A book that documents this unique and unprecedented surge, and addresses the issues raised by it, is sorely needed. Arvind Panagariya fills that gap with this sweeping, ambitious survey. India: The Emerging Giant comprehensively describes and analyzes India's economic development since its independence, as well as its prospects for the future. The author argues that India's growth experience since its independence is unique among developing countries and can be divided into four periods, each of which is marked by distinctive characteristics: the post-independence period, marked by liberal policies with regard to foreign trade and investment, the socialist period during which Indira Ghandi and her son blocked liberalization and industrial development, a period of stealthy liberalization, and the most recent, openly liberal period. Against this historical background, Panagariya addresses today's poverty and inequality, macroeconomic policies, microeconomic policies, and issues that bear upon India's previous growth experience and future growth prospects. These provide important insights and suggestions for reform that should change much of the current thinking on the current state of the Indian economy. India: The Emerging Giant will attract a wide variety of readers, including academic economists, policy makers, and research staff in national governments and international institutions. It should also serve as a core text in undergraduate and graduate courses that deal with Indias economic development and policies.

Excerpt

India became independent on August 15, 1947. Under its visionary leader, Jawaharlal Nehru, it adopted a system of parliamentary democracy that remains intact today. Along with Costa Rica, Jamaica, and Sri Lanka, India is one of only four developing countries to have had democratically elected governments throughout the second half of the twentieth century and beyond. With 1.1 billion citizens, it is also by far the largest democracy in the world.

In 1951, India formally initiated its development program via the launch of the First Five-Year Plan. The United States, which was by then the undisputed leader of the free world, held high hopes from India. The consensus view in the United States was that whereas the East Asian countries, such as the Republic of Korea, were likely to turn into basket cases, India and Africa would quickly grow out of poverty. The U.S. enthusiasm was shared by the scholarly community, which flocked to study India as the model of economic development.

Yet, by 1980, the tables had been turned. In the early 1960s, the Republic of Korea decisively switched from an inward-looking, import-substitution industrialization strategy to a policy of aggressive outward orientation. The results were spectacular: Its per-capita gross domestic product (GDP) grew at an average annual rate of more than 6 percent during the 1960s and 1970s. In two decades, it virtually eliminated poverty as conventionally measured. In contrast, India turned progressively inward, embarked upon a major expansion of the public sector, and subjected the private sector to strict investment licensing. The result was an average annual growth in per-capita GDP of just a little above 1 percent per annum in the 1960s and 1970s. There was no change in the trend of the proportion of the population living below the official poverty line. Indeed, with the population growing more than 2 percent per annum, the absolute number of poor in the country rose.

But just as India was beginning to be viewed as a basket case (Fields, 1980, p. 204) with no hope for the vast numbers of its poor, it was beginning to prepare . . .

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