India’s Post-Liberalisation Blues

Deepak Lal

Published: December 2011

This article first explains why India’s recent form of rent seeking has not damaged its growth performance. Second, it argues that India’s recent embrace of Latin American style populism could lead to a ‘growth collapse’. Third, the entitlement economy being created from the rising tax revenues of recent economic growth could lead to fiscal crises in the face of terms of trade shocks. Fourth, its failure to complete the second generation reforms particularly of the labour market, has held back the labour-intensive industrialisation needed to make use of the ‘demographic dividend’.

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More Papers From This Author in World Economics:

The Indian Economy: From Growth to Stagflation to Liberal Reform
Author: Deepak Lal

This paper considers the optimistic scenario that India was on a high growth path and would follow China’s path with a lag (as its reforms started in 1991 compared with China’s in 1980) which would produce an economic miracle. This did not happen and since 2011 India’s growth seemed to be reverting to what has been termed “the Hindu Rate of growth”. This paper considers why this happened and the likely future path of the Indian economy following the victory of Narendra Modi’s Bhartiya Janta Party (BJP). The paper evaluates the change in India’s economic fortunes following the 1991 economic reforms in historical perspective. The sources of the growth acceleration are explained with an examination of why growth faltered. India’s highly disputed revision of the GDP series shows annual growth rising to 7.5% in 2015-16, but it is more likely that it is around 6%. The author concludes that given its economic fundamentals, with improved policies India would be able to grow at about 10% leading to a per capita income growth of about 8.5–9% for the next two decades.

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Endangering the War on Terror by the War on Drugs
Author: Deepak Lal

The century-old US War on Drugs based on supply control measures is endangering its War on Terror in Afghanistan. With opium poppy cultivation the most profitable crop available to Afghan farmers, the Taliban has been able to use the illegal profits from the trade to buy arms and recruit farmers by offering protection from US led aerial spraying of the crops. These supply control measures are not warranted by welfare economics, classical liberal social ethics, or the actual outcomes of the US War on Drugs. The best policy to deal with US drug addiction would be to legalize drugs, concentrating on enforced treatment of chronic drug users. A successful War on Terror requires an end to aerial spraying, the buying up of Afghan opium and its conversion into morphine, for which there is excess demand in the Third World.

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