By Diya Sood, UG ’23 Reading lists are an essential academic function of the study of
Meera Damaraju, Class of 2019
The Ashoka University Economics Society (AUES) invited Mr. Montek Singh Ahluwalia to give a lecture on 21st March 2018 as a part of its ongoing “Indian Economy at 70” series. Speaking to a full-house, Mr. Ahluwalia shed some of his insights on India’s prospects in today’s global economic and political climate in a speech aptly titled “India and the World”. Here are some take-aways from the talk:
On Growth Trends:
Mr. Ahluwalia said that when liberalization in the 1990s opened borders to foreign investment, the ‘fastest growing economy in the world’ saw a change in growth from 5.5% to 7%. Even as India’s growth rate has been marginally higher than China’s, he said that this was only a short-term gain, and that for real positive effects, India must sustain high growth for longer periods. Despite having foreign exchange reserves north of $400 billion, he pointed out that the current Indian economy still is plagued with several problems, poverty being among the most pressing. He underscored the importance of policy in an open economy like India’s.
On Policy Structure:
Mr. Ahluwalia said that policies needed to be structured in a manner that India maintained momentum and have sustainable targets to see larger growth in the future. However, he cautioned that making stable policies was easier said than done, pointing to the seemingly transitory nature governments at India’s center- from the Narasimha administration to the BJP then the UPA, and now back to BJP. He marked the ineffectiveness of slogans such as “Acche Din”, “Make America Great Again”, and “Garibi Hatao”, saying that they didn’t convey information regarding the program itself.
Adding his views to the debate on how to improve India’s GDP, Mr. Ahluwalia believes that merely handing out subsidies is not the most effective way of improving GDP. Moreover, he argues that the size of the GDP of a country is only an indicator to the rest of the world or its trading partners, and that if the economy itself isn’t growing, it bodes poorly in the confidence of external investors. He remarked that democracies are inefficient in making reforms, taking the example of the introduction of the Goods and Services Tax last year, which he believes should’ve been done at least a decade earlier. Having said that, he was appreciative of the government in recognizing and correcting its mistakes. Mr. Ahluwalia is a strong proponent of privatization and believes that bureaucratic-inefficiencies in the public sector slow down growth. He lauded the Central Government’s efforts to privatize Air India.
On the future:
In a 21st century world that has seen an unhinged President Donald Trump, Mr. Ahluwalia doesn’t rule out the possibility of a trade war among the European Union, China and the United States, even though the direct consequence post the WW1 should’ve been warning enough, he feels. Ending on an optimistic note, he said that in the years to come, as long as India achieves its potential and utilizes its resources efficiently, it would have done well as a democracy.