SEVEN Things for India to Achieve its 2050 Potential
In recent years, we have published a number of papers pointing to remarkably
positive potential growth for India up to 2050
. Having the potential and actually
achieving it are two separate things. In this paper, we outline ten crucial steps
that we believe India must take in order to achieve its full potential. In our latest
annual update to our Growth Environment Scores (GES), India scores below the
other three BRIC nations, and is currently ranked 110 out of a set of 181
countries assigned GES scores. If India were able to undertake the necessary
reforms, it could raise its growth potential by as much as 2.8% per annum,
We highlight ten key areas where reform is needed. In all likelihood, they are
not the only ten, but we consider them to be the most crucial:
1. Improve governance. Without better governance, delivery systems and
effective implementation, India will find it difficult to educate its citizens,
build its infrastructure, increase agricultural productivity and ensure that the
fruits of economic growth are well established
.
2. Raise educational achievement. Among more micro factors, raising
India’s educational achievement is a major requirement to help achieve the
nation’s potential. According to our basic indicators, a vast number of
India’s young people receive no (or only the most basic) education. A major
effort to boost basic education is needed. A number of initiatives, such as a
continued expansion of Pratham and the introduction of Teach First, for
example, should be pursued.
3. Increase quality and quantity of universities. At the other end of the
spectrum, India should also have a more defined plan to raise the number
and the quality of top universities.
4. Control inflation. Although India has not suffered particularly from
dramatic inflation, it is currently experiencing a rise in inflation similar to
that seen in a number of emerging economies. We think a formal adoption
of Inflation Targeting would be a very sensible move to help India persuade
its huge population of the (permanent) benefits of price stability.
5. Introduce a credible fiscal policy. We also believe that India should
introduce a more credible medium-term plan for fiscal policy. Targeting
low and stable inflation is not easy if fiscal policy is poorly maintained. We
think it would be helpful to develop some ‘rules’ for spending over cycles.
6. Liberalise financial markets. To improve further the macro variables
within the GES framework, we believe further liberalisation of Indian
financial markets is necessary.
7. Increase trade with neighbours. In terms of international trade, India
continues to be much less ‘open’ than many of its other large emerging
nation colleagues, especially China. Given the significant number of nations
with large populations on its borders, we would recommend that India target
a major increase in trade with China, Pakistan and Bangladesh.
In recent years, we have published a number of papers pointing to remarkably
positive potential growth for India up to 2050
. Having the potential and actually
achieving it are two separate things. In this paper, we outline ten crucial steps
that we believe India must take in order to achieve its full potential. In our latest
annual update to our Growth Environment Scores (GES), India scores below the
other three BRIC nations, and is currently ranked 110 out of a set of 181
countries assigned GES scores. If India were able to undertake the necessary
reforms, it could raise its growth potential by as much as 2.8% per annum,
We highlight ten key areas where reform is needed. In all likelihood, they are
not the only ten, but we consider them to be the most crucial:
1. Improve governance. Without better governance, delivery systems and
effective implementation, India will find it difficult to educate its citizens,
build its infrastructure, increase agricultural productivity and ensure that the
fruits of economic growth are well established
.
2. Raise educational achievement. Among more micro factors, raising
India’s educational achievement is a major requirement to help achieve the
nation’s potential. According to our basic indicators, a vast number of
India’s young people receive no (or only the most basic) education. A major
effort to boost basic education is needed. A number of initiatives, such as a
continued expansion of Pratham and the introduction of Teach First, for
example, should be pursued.
3. Increase quality and quantity of universities. At the other end of the
spectrum, India should also have a more defined plan to raise the number
and the quality of top universities.
4. Control inflation. Although India has not suffered particularly from
dramatic inflation, it is currently experiencing a rise in inflation similar to
that seen in a number of emerging economies. We think a formal adoption
of Inflation Targeting would be a very sensible move to help India persuade
its huge population of the (permanent) benefits of price stability.
5. Introduce a credible fiscal policy. We also believe that India should
introduce a more credible medium-term plan for fiscal policy. Targeting
low and stable inflation is not easy if fiscal policy is poorly maintained. We
think it would be helpful to develop some ‘rules’ for spending over cycles.
6. Liberalise financial markets. To improve further the macro variables
within the GES framework, we believe further liberalisation of Indian
financial markets is necessary.
7. Increase trade with neighbours. In terms of international trade, India
continues to be much less ‘open’ than many of its other large emerging
nation colleagues, especially China. Given the significant number of nations
with large populations on its borders, we would recommend that India target
a major increase in trade with China, Pakistan and Bangladesh.
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