INDIA’S ECONOMIC DIFFICULTIES

ALL FALL DOWN

The Indian economy can no longer build castles in the air

Ashok Mitra

The Telegraph (Kolkotta, India), December 30, 2011

It was going to happen sooner or later; it has now happened. The gross domestic product growth party, all signs indicate, is over. Refusal to recognize this hard reality serves no good to either the government or the puffed-up India Incorporated. Indian economic growth over the past couple of decades is basically the narrative of a dependent economy. The economy has grown because the export sector has expanded at a spectacular pace. Even as late as in the early 1980s, the country’s exports were barely around 5 per cent of the GDP. A restrictive regime tried to keep imports, too, down to the same limit. The stress in policy-making since Independence was on promoting growth via import substitution. The rationale behind that policy had enough of credibility. The country had ample reserves of natural, including mineral, resources; it had almost unlimited supply of labour; it also had an infrastructure of scientific and technological skills which, while still narrowly based, promised to be capable of both improvisation and innovation. It was silly to export raw materials and minerals when these could be utilized at home for industrial processing, thereby propelling growth and creating employment.

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