On Managing Risks Facing the Indian Economy : Towards a Better Balance between Public and Private Sectors
AbstractWhile the global economy has pulled back from the financial abyss, it is by no means out of the woods. The developing countries (including India) should be prepared for : (a) medium term stagnation in their exports to the developed countries, (b) severe reduction in inflow of longer term capital from the developed countries, (c) a high degree of instability in short term capital flows and (d) instability in exchange rates with a serious risk of a dollar crisis. The impact on the Indian economy of these external factors may be more serious than is currently recognized in official documents. The conventional approach of assessing the impact of exports on growth and of external capital inflows on investment may be flawed. A large part of the recent (2003-07) increase in saving and investment rate and in growth rate in the Indian economy may have been due to external factors. And as the external stimulus provided by rapidly growing exports and cheap external credit during these years fizzles out, so could the recent acceleration in Indias GDP. In order to prevent such reversal in growth rates, increased efforts are necessary to : (a) generate domestic demand, in particular in unorganized sector where there is considerable underemployment and where additional demand can create its own additional supply, (b) mobilize domestic savings for longterm investment, (c) explore opportunities for greater South-South co-operation for trade and finance, (d) provide for protection from volatile capital flows and unstable exchange rates including a possible dollar crisis and (e) make an intensive study of financial risks of the corporate sector. If India is to achieve a steady growth of 8-9 per cent per year over the medium and long-term, it must look for a new balance between market and state and between North and South. In business as usual scenario, India may return to pre-bubble trend growth rates of about 6 per cent per year. On the other hand with appropriate reforms (quite different from those popular under the now defunct Washington Consensus) we can turn the crisis into an opportunity for maintaining rapid growth of 8-9 per cent per year and make it more sustainable and more inclusive.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 22984.
Date of creation: Jan 2009
Date of revision:
Contact details of provider:
Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org
More information through EDIRC
Indian Economy; exports; external stimulus; savings;
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.