Indian Economy

India Knowledge@Wharton writes about the views of two economists on what could derail the ‘India Express’:

Shanta Devarajan, who serves as chief economist for the World Bank’s South Asia region, takes issue with the popular notion that there simply isn’t enough infrastructure — power, water, transportation networks, etc. — to sustain India’s robust economic growth rate of more than 8.6%.

“All this talk about infrastructure is missing the point,” Devarajan insisted. In many cases, the problem lies in mismanagement of the existing infrastructure, which gets gummed up in patronage politics. For example, he said, the “free” provision of water means that little money exists for maintenance or upgrades that could supply water around the clock. Clean, ubiquitous water on demand, meanwhile, is one of the marks of a fully developed country. Such well-developed infrastructure makes a country more attractive to foreign investment.

Arvind Subramanian, a division chief for the IMF’s Research Department, thinks that people need to adopt a more nuanced view of government’s role. He lamented the popular notion of “private sector ingenuity and public sector ineptitude” as an oversimplification. India’s blistering economic growth, which took root in earnest during the 1980s, actually owes much to having serviceable, if imperfect institutions, and to considerable reform within them, he said.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.