An economic strategy for India: Many bottlenecks and challenges that India faces
Last year saw the 75th anniversary of India’s Independence, a milestone that led to considerable reflection, as well as visions of where India’s economy could be at the country’s centenary. In fact, every Independence Day marks a milestone, and this one led me to reflect back to an event from half a year ago—the “India Dialog” conference held at Stanford University. Among numerous presentations, what stood out were those that offered a roadmap of India’s economic strategy. Indeed, the term “roadmap” comes from a document that underpinned the conference, the “Competitiveness Roadmap for India@100,” published in July 2022 to help design India’s growth journey over the next 25 years.
The conference began with a keynote by Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister. He emphasised seven aspects of what he saw as the transformation that India’s economy is undergoing. These are acceleration in urbanisation; greater formalisation of business enterprises; diversification in agriculture and rural India more generally; a shift from self-employment to employer-employee structures; focused provision of basic necessities such as toilets, drinking water and greater financial inclusion; a digital infrastructure that supports public service delivery as well as private services such as payments; and improvements in transport infrastructure and logistics spanning multiple modes.
The competitiveness report itself was produced by Michael E Porter and Christian HM Ketels, from Porter’s Institute for Strategy and Competitiveness at Harvard, which inspired India’s own Institute for Competitiveness. Ketels presented the lessons of the report, stressing the joint importance of pursuing social progress alongside material prosperity. Importantly, he noted that India is doing many of the right things, but may need to do them differently. Many of the bottlenecks and challenges that India faces require more coordination and integration across levels of government and across domains. Among the many examples he gave, the challenge of low female labour force participation provides an important illustration. Childcare, childhood poverty, skills-based education, healthcare and public safety, mostly thought of in moralistic terms and siloed or fragmented in implementation, all combine to create barriers to female labour force participation and productivity. He highlighted the changes in institutional architectures needed for the next phase of India’s growth and development, including at the level of states and cities.
Later in the conference, in another keynote, Arvind Virmani, of EGROW Foundation and NITI Aayog, and another veteran policy advisor, reminded the audience of how far India has come in terms of dismantling the intricate and growth-preventing web of controls on its economy, and of major institutional reforms in areas such as the tax system. He highlighted the potential for digital technology in areas such as health and education, as a tool for overcoming problems of scaling up to meet India’s development needs. He emphasised the opportunities to participated in global and regional production networks more fully, including the benefits of trade agreements in addition to physical infrastructure. Importantly, he honed in on the large and specific needs of training in the middle of the skills distribution, where, for example, large and complex commercial and industrial building projects need plumbers and electricians with skills far beyond those of residential housing.
If a strong recognition of the need to tackle inequality in dimensions such as education, health, geography and gender was a common theme in these keynote presentations represented a commonality of ideas across the Indian intellectual spectrum, the focus on the role of business was more novel. Academic analyses of India’s development have tended to under-analyse the role of dynamic, employment-generating business firms. The country needs firms to be established at higher rates, and have an environment that enables them expand more robustly (or exit more quickly and effectively if they fail). These ideas were much more in evidence in the conference, especially with respect to the middle of the size distribution of firms, as well as in the context of tackling geographic clustering and regional inequality.
What was made clear was that social progress and material prosperity do not have to be in opposition to each other, or have hard-and-fast trade-offs in practice. Nor do “pro-business” and “pro-market” policies have to be mutually exclusive, if “business” is considered in an inclusive manner. The conference also highlighted the role of urbanisation and cities, and the need to coordinate policies and implementation across central, state and local government. It highlighted the need to strengthen institutional and fiscal capacity at the state and municipal levels.
The idea of a roadmap for India’s social and economic progress is nothing new, of course, and has many previous incarnations. On the economic front, the Stanford conference suggested that there is a substantially new strategic vision being formulated, one that is very hopeful, even ambitious—aiming to get India close to high-income status at its 100th anniversary, without short-changing social progress. The political challenges, sometimes alluded to in the conference, but mostly beyond its scope, may remain as the biggest hurdles. Politics permeates society and structures of power can stifle progress, but seeing the road ahead clearly is important as one attempts to travel it.
Written by Nirvikar Singh
The writer is professor of economics, University of California, Santa Cruz