Urban infrastructure epitomizes the inadequacy of public services that constrain growth in India. Photo courtesy of Russell A. Green, Ph.D.
The Indian economy’s growth rate, above 6 percent at present, makes India the envy of most of the world. But to those who know India, growth rates below 7 percent are a sore disappointment. India aspires to double-digit growth, and with large domestic markets, a diversified economy and a large pool of competitive labor, it holds the potential to reach its goal. To meet its aspirations, India requires a series of reforms to its economic structure that can facilitate business growth and encourage private sector investment.
The Baker Institute International Economics Program examined the slowdown in the Indian economy in the recently released policy report “Limits of the Jugaad Growth Model: No Workaround to Good Governance for India.” Low income levels spawned a remarkable resilience and creativity in India encapsulated in the Hindi word jugaad — loosely translated as persevering despite limited resources — that has captured the attention of management experts worldwide. Yet too often jugaad replaces insufficient basic government services like power, public education, transportation infrastructure and even functioning courts.
The report makes the case that lack of public services has become a binding constraint for the economy, as economic expansion has far outpaced the government’s capacity. As India’s parliament begins its budget session this week, the reform agenda outlined in the report provides a priority list for supplying the essential government support for a high-growth economy.
Reformists were dealt a setback on March 6, when the Congress Party — which leads the coalition government in Delhi — fared poorly in state-level elections. With the coalition now less stable, the prospect of parliamentary action on any front appears unlikely. Until India finds a path forward on reforms, the same can be said of the prospects for the Indian economy to approach its double-digit potential.
Russell A. Green, Ph.D., is the Baker Institute’s Will Clayton Fellow in International Economics and the author of “Baker Institute Policy Report 52: Limits of the Jugaad Growth Model: No Workaround to Good Governance for India.” Green spent the past four years in the Republic of India, where he served as the U.S. Treasury Department’s first financial attaché to that country. His economic research has addressed bank regulation, financial liberalization, international reserve accumulation, bilateral investment treaties and the economics of international reproductive health.