Indian economy continues to grow robustly, and has been doing so for two decades, contemptuously ignoring our governments. The only way to explain this contradiction is that politics and economics are increasingly getting divorced in India, and we may have become like Italy, where they used to say, the economy grows at night when the government is asleep.
Roach points out that India's consumption share of GDP is 64% — higher than that of Europe (58%), Japan (55%), and China (42%). The world economy needs another major consumption-led growth nation other than America. Thus, "India's consumption-led approach to growth may be better balanced than the resource-mobilisation model of China". That consumption is a virtue is an idea that Lord Keynes made popular, and serious economists still believe it, but Indians with their streak of asceticism are less confident.
Roach suggests that this government's populist programmes, which go under the code name "inclusion", such as the Employment Guarantee Act, might even generate a consumption dividend in the hands of the poor. I would agree with him if I had any hope that its benefits would actually reach the poor. But it would also argue that reforms elsewhere — creating an integrated goods and services tax, furthering disinvestment, committing to genuine special export zones and fiscal prudence — are not incompatible with, but might actually further, social objectives."
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