Next Wave of Economic Reforms in India – Denis Medvedev’s lecture at IIM Calcutta
The Public Policy and Politics Special Interest Group organized a lecture by Dr. Denis Medvedev, Senior Country Economist, World Bank Group on the Next Wave of Economic Reforms in India on the 20th of November 2014. Dr. Medvedev has held previous similar positions in the Latin America & Caribbean and African regions and in the Development Prospects group. He holds a PhD from the American University, Washington DC. The World Bank as an organization aims to address issues of poverty and shared growth. The talk focused on the challenges facing inclusive growth in the Indian economy with special focus on reducing poverty in the lower income states in India.
Dr. Medvedev spoke of the current developments in the Indian economy with the new government in place. He touched on how external conditions including reduced inflation because of falling energy prices, improving foreign portfolio and direct investments have resulted in positive outcomes in the economy. He stressed on the fact that US recovering well was a bonus for India because of it being the major market for Indian exports and the boost to balance of payments as a result of North American geography being a large source of remittances (second only to the Middle East), as was our reducing fiscal deficit and reform momentum picking up.
The longer term challenges facing India were then discussed by Dr. Medvedev. He cited the case of the Index of Economic Complexity and how exports play a pivotal role in the GDP of a nation. India lies on the higher end of this metric which reflects a significant potential for future growth. India’s falling dependency ratio adds to its future growth potential because a larger proportion of the population would be in the labour force in the decades to come. These signals all point to the fact that India would be ideally suited to be a manufacturing hub in the world economy. However, India compares relatively poorly to countries like Korea, China and Brazil in its share of manufacturing in overall GDP when these economies were in a similar situation to that of India in terms of per capita income. He spoke of how policy issues and restrictions were some of the core causes that contributed to this. Varying sectors which rely heavily on manufacturing such as Apparel, Auto Parts, Electronics and Machinery suffer from reduced domestic and international competitiveness because of policy issues such as import restrictions as well as cost constraints. He stressed on how logistics was a pressing issue if manufacturing was to improve. State border checkpoint regulations, for example, lead to significantly suboptimal usage of resources. In this regard, Dr. Medvedev felt that the implementation of reforms like GST were crucial to aid the manufacturing scene.
Finally, he emphasized on World Bank’s objective in reducing world poverty and that India was central to achieving this goal. The organization has charted out optimistic and ambitious scenarios based on India’s current growth rate and its potential and this points to promising outcomes provided the right environment is in place. The one and a half hour talk and Q&A session was an eye opener in terms of firstly, the challenges facing India if it is to achieve significant strides in the manufacturing sector and hence overall growth and secondly, the World Bank’s efforts in this direction.
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