These are two columns reflecting on what went wrong in India in 2011, what I hope will change for the good, and what the global and domestic threats are for the continuance of India's growth story.
Making 2012 a Better Year for India
A year ago, I offered an optimistic and hopeful view of India’s possibilities in 2011. As it turned out, things were much less rosy than I had guessed they might be. I had gone with the then-popular growth forecast of 9%. Growth has been much lower. Part of the problem was the ongoing European crisis, and the US’s slow recovery. Much of the difference came from what has been happening within India.
A year ago, I remarked that the private sector in India has done well despite poor governance. This has remained true, but not to the extent that I had hoped. The general poor quality of governance was compounded in 2011 by uncertain handling of corruption, which surfaced as a major issue for India’s citizens. My view is that India’s ruling coterie is currently weak in its leadership and its vision. Too many of those who rule are focused on short-term personal advantage, rather than leading the country well. Will this improve in 2012? It is hard to say what will happen at the national level. However, one can hope for more progress in governance quality in some of the states.
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Thousand Rupee Notes on the Pavement
The past year has driven home the fact of globalization, even for countries like India that are relatively less integrated with the global economy. For example, India’s ratio of exports of goods and services to GDP is only about two-thirds of China’s (despite excluding Hong Kong and Macao). But it has still felt the wind from global storms. The European crisis, in particular, has heightened risk perceptions, slowing global growth, and leading to a flight to safety of global capital. What are the potential global threats for India in 2012?
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Saturday, January 28, 2012
Thoughts on FDI in Retailing
Here are two columns I wrote late last year, reflecting on the political process and economic analysis associated with India's attempt to open up multi-brand retailing to FDI. The first column also has some thoughts on developmental objectives and social opportunity, based on some new work by Yale economist John Roemer.
Development and Opportunity
The furor over the attempt to open up FDI in multi-brand retail reminds us of several things about India. But the true lessons may not be the seemingly obvious ones. It is certainly possible that the government’s handling of the policy change was not the best it could have been. On the other hand, those with long memories will recall numerous occasions where policies have been floated, reversed, modified or even transformed. At one time, all FDI and disinvestment were controversial—now the discussions are more nuanced (even if political rhetoric remains strident).
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Retailing and Reform
In my last column, I mused on India’s economic reform process and inclusive growth, in the context of opening up multi-brand retail to FDI. I want to return to the question of political capital, and policy thinking about reform in the retail sector.
On using up political capital, I think ongoing events have proved me wrong. Opposition to opening up multi-brand retail has come from the same quarters as opposition to other reform measures, including the Pension Bill and Companies Bill. On all these, the government has openly looked for compromises that will lead to acceptance of the reforms. If that is the case, then moving on multiple fronts may give the government more chance of getting some changes through, not less. The government has also reset its approach to FDI in retail, marshaling interest groups that might benefit, and saying more to make the case for the positive consequences of the change. So even if it lost some political capital initially, it should recover it quickly.
Read more...
Development and Opportunity
The furor over the attempt to open up FDI in multi-brand retail reminds us of several things about India. But the true lessons may not be the seemingly obvious ones. It is certainly possible that the government’s handling of the policy change was not the best it could have been. On the other hand, those with long memories will recall numerous occasions where policies have been floated, reversed, modified or even transformed. At one time, all FDI and disinvestment were controversial—now the discussions are more nuanced (even if political rhetoric remains strident).
Read more...
Retailing and Reform
In my last column, I mused on India’s economic reform process and inclusive growth, in the context of opening up multi-brand retail to FDI. I want to return to the question of political capital, and policy thinking about reform in the retail sector.
On using up political capital, I think ongoing events have proved me wrong. Opposition to opening up multi-brand retail has come from the same quarters as opposition to other reform measures, including the Pension Bill and Companies Bill. On all these, the government has openly looked for compromises that will lead to acceptance of the reforms. If that is the case, then moving on multiple fronts may give the government more chance of getting some changes through, not less. The government has also reset its approach to FDI in retail, marshaling interest groups that might benefit, and saying more to make the case for the positive consequences of the change. So even if it lost some political capital initially, it should recover it quickly.
Read more...
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