India’s Growth Story

AIndia has attained much economic success in the last three decades. Yet economic deceleration in the recent years has generated worried commentaries about India’s growth outlook. In this paper, we offer a long-term macro perspective on India’s growth experience. Analyzing past five decades of data, we note that growth has slowly but steadily accelerated over this period, become less erratic, and has been well diversified across sectors and states. Assessing the period since the early 1990s more granularly, we note three distinct phases of growth. A period of slow acceleration from 1991 to early 2000s; a period of rapid growth with several features of unsustainability during 2004–08; and a corrective slowdown that started with the Global Financial Crisis in 2008. The slowdown was reflected most profoundly in investment, credit, and exports. Even as the economy recovered to a 7–7.5 percent growth rate, durably accelerating it to a higher level will require concerted policy momentum that succeeds in reversing the slowdown in investment, credit supply, and exports, and the support from the global economy. Maintaining hard-won macroeconomic stability, a definite and durable solution to banking sector issues, and realization of the expected growth and fiscal dividend from the Goods and Services Tax are some of the factors that can help attain a higher growth rate. The paper also includes a short annex on India’s new GDP series and comparisons with the old.