Innovation is widely recognized and accepted as a key ingredient of sustained economic growth; an objective of policy that is today as salient for developing countries as it is for the Organisation for Economic Co-operation and Development (OECD). The rise of Asia is as much about its domination of low-cost manufacturing as it is about its increasing strength in knowledge-based industries and ability to innovate new technologies and new business models.
India is currently undergoing a rapid economic and demographic transformation. Since 1980, average living standards have experienced a sustained and rapid rise. The gross domestic product per capita has risen by 230 percent; a trend rate of 4 percent annually. Poverty declined at an annual rate of 0.88 percent from 1983-94, and at a slightly lower rate of 0.77 percent from 1993-05. Life expectancy has risen from 54 years to 69 years while the (crude) birth rate has fallen from 34 to 22 between 1980-2008.
In September 2009, while speaking at the inauguration of the International Conference on the Peaceful Uses of Atomic Energy in New Delhi, Prime Minister Manmohan Singh stated that India could have 470 gigawatts (GW) of nuclear capacity by 2050.
Given the consensus that infrastructure is a key constraint for economic growth, one would expect infrastructure policy to receive a lot of attention. However, over the last five years, the record has little to show. Not only has this government continued some of the misplaced policies of its predecessor, almost all its interventions have contributed to worsening the situation.
The internationalization of Indian firms may seem like the logical extension of an historical trend that began in Europe after the industrial revolution, spread to America in the 19th and 20th centuries, and then took hold in countries like Japan and South Korea. That India would spawn multinationals once it embraced globalization may therefore seem unsurprising, even inevitable.
But there was nothing inevitable about the rise of made-in-India multinationals.
Much has been said about the fallacies in India’s energy policy-a lack of coherent planning, endemic ills of cross-subsidies, inefficiencies of state-owned companies, and so on-to argue the impossibility of India’s ability to meet the energy demands of a growing economy. Although true in past, this argument is weakening. Amidst excessive criticism of every single government action, the real, but subtle, face of Indian energy policy has not attracted mass attention yet. And understandably so:
The primary purpose of physical infrastructure, even by a narrow economic viewpoint, is to support economic activity, while that of social infrastructure, such as education and healthcare, is to build and maintain human capital. Sadly, the infrastructure policy of the Indian government, both past and present, seems to be concerned with reducing fiscal costs, to the detriment of those two core objectives.
In the national budget for 2008-2009, India’s Finance Minister Palaniappan Chidambaram has proposed that the federal government will waive loans to farmers, with the total waiver amount capped at Rs 60,000 crore ($15 billion).
Lord Meghnad Desai put a dampener on India's global aspirations when he recently prophesied that "China will be a great power, but India will just be a great democracy." Indians will chafe at this prognostication. But one key question is this: suppose, as Indians will no doubt hope, that the future is unkind to the Desai prophecy. How then should India prepare itself for being an important and influential player in current and new global economic policies and institutions?