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BW Businessworld

Book Extract: A Short History Of Fast Growth

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Since Indian GDP preceding independence was mainly stagnant and sometimes declining, even economic growth of 3.5 per cent per annum in the decades immediately following independence was, in fact, a big leap upwards. But the fact remains that 3.5 per cent per year (translating, at that time, into something like 1.5 per cent per year in per capita terms) is painfully slow for the purpose of rapid development and poverty reduction. The modesty of Indian economic growth, which lasted from the 1950s through the 1970s, gave way to considerable quickening in the 1980s, with a higher rate of expansion at 5 per cent per year. And then, following the economic reforms of the early 1990s... the economy settled down to faster progress, establishing a new norm of rapid growth, very near the top of the world league. The robustness of high growth in India is undoubtedly connected with the economic reforms of the 1990s, which have built a solid foundation for continuing economic growth. After hovering between 5 and 6 per cent, the growth rate took a further hike upwards to 7 per cent and then further up, even crossing 9 per cent for several years... Given India’s long- standing income poverty, a phase of fast economic growth was certainly needed, and despite the recent slowdown (which still leaves India as the second fastest-growing large economy in the world), India clearly has made huge progress in this respect.

The need for rapid growth is far from over, since India, after two decades of rapid growth, is still one of the poorest countries in the world. Indeed, as will be discussed in the next chapter, India’s real income per head is still lower than that of most countries outside sub-Saharan Africa. The picture is even worse if we focus on the quality of life of the underprivileged part of the Indian population, hundreds of millions of whom continue to lack the essential requirements of satisfactory living, from nutritious food to health care, decent work conditions, and warm clothes in the winter. Growth alone is unlikely to end these problems, at least not within a reasonable time frame... 

(This story was published in BW | Businessworld Issue Dated 26-08-2013)