February 23, 2009
Abstract: India’s GDP registered an astounding average annual growth rate of 8.5% during 2003-08. During this period, India successfully took advantage of a favourable external environment through domestic policy reforms in 3 key areas: (a) tax concession on housing loans; (b) deregulation of interest rates; and (c) massive highway development programs. Reform was a key attribute of this set of growth drivers. In 2008-09, however, India’s GDP growth rate slowed down considerably in the face of deteriorating external conditions. The question is, to revive accelerated growth, does it help to revisit the growth drivers of 2003-08? Yes, while the less favourable external conditions prevailing now have to be contended with, there is certainly merit in revisiting the domestic growth drivers of 2003-08. If “reforms” are seen more generally as a driver of growth, there are opportunities for replication, albeit not in the same areas as in 2003-08. Thus, labour reforms and a safety net for urban blue-collar workforce could be among India’s new growth drivers.
Keywords: reforms; growth; external conditions; tax concession; interest rate deregulation; safety net