Co-presented by CIGI and the Canadian International Council (CIC). This presentation will explore the growth process in India and how it has been affected by the reforms started in 1991. Growth in India has gradually accelerated since the mid-70s. Growth in the 80s was fuelled by large public sector deficits. But this, because of a fixed exchange rate and limited capital mobility, resulted in a large BOP deficit, and high interest rates which discouraged investment. While the effect on investment could be offset, the balance of payments deficit became unsustainable.

Reform changed the nature of growth. The expansionary effect of budget deficit was compounded by the expansion of exports caused by devaluation. Since the reform, exports of goods and services have tripled as a share of GDP; they doubled in China. But as capital flows increased they created the same policy dilemma as in China-- either let the nominal exchange rate appreciate or to let the money supply increase leading to higher inflation. India had to give up the policy of sterilizing capital inflows earlier than China. But ultimately in both cases the currency has appreciated in real terms; in India because of nominal appreciation and in China because of higher inflation. Dr Manmohan Agarwal joined CIGI as a Senior Visiting Fellow in January 2008 after leaving Jawaharlal Nehru University in India where he was Dean of the School of International Studies. Dr. Agarwal holds a PhD in Economics from M.I.T. and has previously served as Visiting Professor at the University of Western Ontario, and Teaching Fellow at M.I.T., among others.

Dr. Agarwal has a long and distinguished record of expertise in international trade, development and economics as it relates to South Asia, and especially to India. He contributes to CIGI's various projects related to trade and economic development, and he is an integral part of the development of a new group at CIGI focusing on India.

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