Task Description: All students need to submit an end-of-semester essay on a common topic. The objectives are to test students' ability to prepare a research report and to evaluate their skills on...

India is part of the BRIC group that has been showing the way in terms of growth to a world economy which includes Japan-that continues to struggle with a deep recession that refuses to shrug off, the European Union that is mired in self doubt about its own survival as a bloc, and USA that continues to struggle with a recession brought about by the excesses of market economy and its own policies.
BRIC nations have been growing at faster rates so that most reports put either China or India as the world’s biggest economy by 2050. Ina recent Citigroup report, ‘Indian economy will reach USD 85.97 trillion size in terms of purchasing power parity by 2050, while the Chinese GDP would be USD 80.02 trillion during the same period.’ Before 1991, India experienced growth as per the ‘Hindu’ rate of 2%. The precarious BOP situation in 1991 made the Indian policymakers realize the need for a systemic change with liberal government controls, a larger ground for the private sector, and the benefits of greater integration with the world economy. As result India was opened for international trade, foreign investment entry norms were relaxed, the domestic industry was deregulated and opened for private participation, indirect tax reforms were made the mainstay of trade policy and the central bank was entrusted with greater responsibility of exchange rate management and inflation control. ‘The reforms of the last 10 years have gone a long way toward freeing up the domestic economy from state control’.
The reforms spanned 3 main areas. The first was reforms in industrial policy. Industry was decontrolled with many opened for private sector. Industrial licensing was abolished to a large extent. The list of industries reserved for public was pruned from 18 to 3-defence, atomic energy and railways. More importantly, restrictions of import of foreign technology were removed, which ushered in a wave of new and better technologies that speeded up India’s growth. The second area was reforms in trade policy. The policy of import substitution and the underlying ‘infant industry’ argument was effectively abandoned. Import licensing was abolished for capital goods and intermediate goods early in the decade, along with removal of quantitative restrictions on imports of agricultural goods and consumer goods in 2001. The adoption of flexible exchange regime also boosted trade; especially the development of exports was phenomenal. The last are relates to financial sector. A series of reforms to liberalize banking operations ( like entry of foreign banks was given towards the end on 1990s). Other steps involved more transparency in interest rate determination, reserve requirements, and monetary independence of RBI were taken in step with greater and more effective regulation.
However there were severe criticisms that the government was not doing enough. This could be traced to the compulsions of fiscal federalism and the rise of regional parties. The need to evolve a consensus before any major policy slowed down decision making. As a result several key areas remain untouched by reforms. The more noticeable include power, infrastructure, agriculture and education. On the fiscal side lack of banking reforms, high fiscal deficits due to growing subsidy burden remain key challenges that policy makers need to surmount. The slow pace of reforms, or the ‘start and fit’ approach of reforms after 2000 has been called the gradualism approach. While this may have hindered growth and not allowed India to reach its potential GDP levels, it is now being applauded after the US recession, as we will discuss below.
This must not take away the fact that Indian economy grew at spectacular rates after 2000.
As the chart and...