INDIA’S POTENTIAL AND REALITY

INDIA’S ECONOMIC STAR IS FADING

Commentary: Once-promising nation has only itself to blame

Satyajit Das

MarketWatch, April 19, 2012

SYDNEY (MarketWatch) — In the aftermath of the global financial crisis, optimists hoped that the BRIC (Brazil, Russia, India, China) countries would drive the world’s economic engine. But those hopes have sputtered.

China’s economic growth has slowed to its lowest rate in three years. Brazil’s economic growth has fallen to under 3% from around 7.5%. Russia’s economy is heavily dependent on oil and energy prices.

And India? It seems destined to never fulfill its economic potential.

In the 30 years following independence in 1947, India achieved a modest rate of economic growth of 3-4% per annum. The “Hindu rate of growth” was a derogatory term coined by economist Raj Krishna to draw attention to India’s poor performance compared to other Asian economies.

Reforms in the 1990s paved the way for a period of expansion and relative prosperity for India — exemplified by the marketing slogan “India Shining,” which was first popularized by the then-ruling Bharatiya Janata Party for the 2004 Indian general elections.

Over the last two decades, India’s economy has almost quadrupled in size, growing at an average rate of about 7% per annum. India’s GDP rose by 43% between 2007 and 2012, slightly less than China’s, which increased by 56%, but much faster than developed economies that grew only 2%.

In late 2011, the Indian government’s 12th five-year plan forecast growth of 9% between 2012 and 2017. Yet by early 2012, India’s growth had slowed to around 6%, high by the standards of developed countries but well below the levels required to maintain economic momentum and improve the living standards of its citizens.

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