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Saturday, August 14, 2010

India's middle income trap

In the Financial Express today, I have a piece on India's middle income trap: Don't take growth for granted. Coincidentally, on the same day, T. N. Ninan in the Business Standard had a piece on a similar theme, and in the Indian Express, Shekhar Gupta ponders where UPA-II went astray.

My thinking about these questions in recent weeks has been prodded by questions about entry of private banks, and by the campaign against C. B. Bhave.


  1. "The foundations of civilisation -- courts, human rights and freedom of speech -- are malfunctioning."

    "having a fairly badly drafted Constitution."

    Glad someone said this, coz it needed to be pointed out. Economic development is only a means to the end. The end being a good social, cultural and value system that allows every individual a fair chance at realizing their potential. If that is the eventual metric, we are way, way, way off.

    As far as corruption goes, you have mentioned the license-permit raj issue. Raghuram Rajan has mentioned that it has morphed into the land mafia raj. Times have changed, the corruption has kept up and scaled quite well. The phrase needs to come into the popular lexicon just as people know about license raj and all its badness.

    And, what about a possible fifth issue of lack of quality education and hence, poor quality human capital?

    Lastly, there is a tendency to benchmark and limit oneselves against US/UK/OECD (and that too, the worst parts). I hear a lot more of: so what, X developed country also has corruption. These comparisons become easier when OECD is in crisis. But, is it any good to limit oneself by favorable comparisons against bad examples/states of the world, or should one compare and aim against what is/was good in other systems? All this does is to rationalize, promote a mediocre state of the world (the sad result of the OECD crisis).

  2. Ajay,

    I feel that your comment about the quality of the Indian Constitution was gratuitous, and lacking in specificity.

    Why would you make such a statement about the Constitution?

  3. your articles have been fanatstic..but i dont agree with fiscal prudence you have mentioned. if an individual who is earning 100 Rs per month can take a loan of 20 years income, why cant a country with 30 years of fanatstci growth tarjectory in front if it , cant over spend. we are evolving country...

  4. have been regular reader of your blog.. i agree on certain parts but deficit part if not agreeable. when an individual is eligible for credit of 200 times of his monthly income a country can too in the same way. only thing here to be watched is how this credit is spent. the schemes are fake i believe, but still it is manner of dissmeniation of wealth among people.

  5. You are on the dot.
    Corruption has grown enormously, particularly in judiciary and politics.
    I think our system will degenerate into a mobocracy. The dispossessed are very sullen.

    D Balasundaram

  6. Hi Ajay,

    Invariably you are writing things earlier than any one else. I could not agree more on Italy Problem and `Flailing State' problem. Why leave IPL mess. Corruption has just become very sophisticated and institutionalised. Look at the use of financial engineering in developing the holding structure of the IPL teams.



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