India: Pegging Back

India’s growth forecast for 2011-12 has been cut to 8.2% by the Prime Minister’s Economic Advisory Council (EAC). The Council had also urged rapid action on the part of Government on various pending reforms. We all know the laundry list – land acquisition, multi-brand retail, Goods and Services Tax, Direct Tax Code reforms, etc., etc. Read this report too.

Morgan Stanley’s Chetan Ahya has pegged his growth forecast for the fiscal 2011-12 at 7.2% down from 7.7%.

This blog post in ‘Beyond Brics’ blog in FT is a good one for many tongue-in-cheek remarks it makes on the Indian growth story.

That said, I am glad that Vivek Dehijia makes the point that liberal economic reforms are not the source of corruption. This is well put:

It is a convenient conflation of terms to explain corruption to be the byproduct of “crony capitalism”. That is true, as far as it goes. But when you unpack the term, the real culprit is cronyism, not capitalism per se. Let’s not forget that what preceded crony capitalism was crony socialism, not a pristine egalitarian socialism of the type idealistically – and, as it turned out, naively – envisaged by Jawaharlal Nehru. [Full article here; subscription may be required]

Further, I am not too worried about a growth slowdown in India, although I would not be surprised to see it below 6% at some point in time (2012-13?), if not in 2011-12. To be sure, it might be a image issue for India but that could well be a wake-up call for Indian politicians, particularly the Congress Party and particularly the Party President and Mr. Rahul Gandhi. India’s economic reform deficit is chiefly traceable to them.

This MINT editorial says that India has been in the grip of the political economy of populism. Well put.

It is good that the EAC has advised rapid action on pending policy action, publicly. Not that it would make the Indian Prime Minister snap into action immediately. Unfortunately, he has never shown commitment to economic reforms when tested.

See Niranjan’s comments on the growth slowdown and on India’s structural economic issues here and here. In this short Op-ed., Niranjan gives more credit to the Indian Prime Minister than is perhaps warranted:

Manmohan Singh could go down in history as the man who helped energize the Indian economy after 1991 and the man who was at the helm when it lost speed after 2011.

This post originally appeared at The Gold Standard and is reproduced here with permission.