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Working Paper #25
by: Rajiv Kumar, Amitendu Palit, and Karan Singh
Published: May 19, 2007
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The robust performance of the Indian economy in recent years, with economic growth averaging 8.5 percent, has generated intense debate regarding India's future economic prospects. Indeed, the future of more than a billion people, many of whom still exist in degrading and unacceptable poverty and deprivation, depends critically on India's ability to grow at high rates. This paper, while examining the issue, argues that India's recent economic performance is a result of entering a virtuous circle of growth generated by some key structural drivers. The latter include a dynamic private sector, benign external environment and a well-functioning democracy. The paper also points out that high growth can be sustained only if necessary policies are adopted for removing binding constraints like poor infrastructure, stagnant agriculture and lack of fiscal space. The paper identifies education as the most critical sector requiring reforms, followed by public goods delivery and labour markets.