Realizing India’s Potential
Yesterday, I discussed India’s incredible economic transformation over the last two decades and some of the challenges that the country is currently facing. So, what can India do to reduce the impact of global uncertainty and improve growth performance and boost investor confidence?
India’s firepower to respond to a crisis with traditional monetary and fiscal stimulus is much weaker now than prior to the 2008 crisis. Fiscal space for additional spending is severely constrained in light of continued high deficits. Room for monetary policy easing is modest in light of continued high inflation, and still low real interest rates. Moreover, when investor confidence is at a low ebb as it is in India, easing monetary policy would be tantamount to “pushing on a string.”
India has been a beacon to the world on how a thriving and vibrant democracy can transform itself into an economic powerhouse. The metamorphosis that took place in the Indian economy after the reforms of the early 1990s is nothing short of spectacular. The Indian economy was transformed into a dynamo of innovation and diversification. This fundamental transformation unlocked two decades of explosive growth in which poverty rates fell by nearly 20 percent, exports as a share of GDP increased nearly five-fold, and standards of living increased by a factor of almost four. This trajectory received but a glancing blow from the 2008 global financial crisis—this resilience was a testimonial to the benefits of the economic reforms of the previous 15 years.
The results are in! The selection committee has chosen 25 winners in the World Bank’s Imagining Our Future Together art contest for young artists.