Development Drivers and Limitations
Edited by Natalia Dinello and Shaoguang Wang
Chapter 2: India’s Growth: Past and Future
Shankar Acharya India and China are often bracketed together as Asia’s ‘Giant Dragons’, set to dominate the global economy in the twenty-first century. However, as this chapter shows, India’s economic rise in global commerce, capital and energy has been much more gradual than China’s and is likely to remain so, thus posing few adjustment problems for the rest of the world. This chapter is divided into five sections. First, it briefly reviews India’s growth performance since 1950 and indicates a few salient features and turning points. Second, it discusses some of the major drivers of India’s current growth momentum (which has averaged more than 8 per cent since 2003) and raised widespread expectations (at least, in India) that growth of more than 8 per cent has become the new norm for the Indian economy. Third, it points to some of the risks and vulnerabilities which could stall the current dynamism if corrective action is not taken. Fourth, it appraises the country’s medium-term growth prospects. Finally, it assesses some implications of India’s rise for the world economy. India’s Growth Performance, 1950–2006 Table 2.1 summarizes India’s growth experience since the middle of the twentieth century. For the first 30 years, economic growth averaged a modest 3.6 per cent, with per capita growth of a meager 1.4 per cent per year.1 Those were the heydays of state-led, import-substituting industrialization, especially after the 1957 foreign exchange crisis and the heavy industrialization bias of the Second Five Year Plan (1956–61). While this strategy...
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