This is the title of my new paper.
The above analysis is an attempt to compare India’s growth story with other countries in both pre and post-crisis periods. The idea is to understand how unique the Indian growth story was before the crisis and whether the growth story can continue post-crisis (whenever it ends). The analysis shows that most economies had higher growth rates in the 2003-07 compared to 1990-02. The structural drivers of growth may be different but most economies gained during this unusual growth period dubbed as Great Moderation.
The analysis also shows India’s vulnerability on two other indicators – inflation and budget deficits. Inflation has become a serious concern post-crisis and high budget deficit was an issue even precrisis. India should also make efforts to start reporting consolidated budget deficits numbers of centre and states. The current reporting of only centre’s fiscal deficit masks the true fiscal deficit of the country. We have seen how India has one of the highest budget deficits in the world and is expected to top the list in 2013.
Overall, focusing extensively on 2003-07 phase as the turning point of Indian economy is not really correct. It was a phase where most countries enjoyed high growth rates and was not unique to India and few others. India clearly has to prove itself in the post-crisis period by growing over a sustainable period. India will also need support from global recovery as decoupling theory has been proved wrong over and over again. With global recovery still some years away, the focus should instead be on lowering its budget deficit and inflation levels. India also ranks very low in Doing Business Rankings compiled by World Bank – 132nd in a ranking of 183 countries. Working on these indicators will make Indian economy more resilient and investor friendly, rather than just mentioning about the magical 9% growth number.
Details in the paper. Comments welcome..