AIEFS NEWSLETTER

AIEFS is a non-profit academic organization founded in 1975 at Bloomsburg State University, Pennsylvania

Volume 9 Issue 1
Association Objectives
Promote interest in
the study of Indian
Economics & Finance
Encourage inquiry
into, and analysis of the
problems facing the
Indian economy
Facilitate communication and discussion
among Scholars

Executive Committee
2013-2015
President
Amitrajeet Batabyal
Rochester Inst. of
Technology

Executive Director

Chandana Chakraborty
Montclair State University
Assistant Executive Director
Meenakshi Rishi
Seattle University

Treasurer

Artatrana Ratha
St. Cloud University

Elected Members

Kalyan Chakraborty
Emporia State University
Shailendra Gajanan
University of PittsburghBradford
Sudipta Sarangi
Virginia Tech
Sushanta Mallick
Queen Mary Univ. London
Bansi Sawhney
University of Baltimore

April 25, 2016

Indias Growth: Possible Futures

Talk delivered at AIEFS annual meeting, San Francisco, January 3, 2016
Nirvikar Singh
Professor of Economics
University of California, Santa Cruz
Despite debates about the possible limitations of aggregate economic growth as
a policy objective, the growth rate of GDP remains the first-order indicator of
material progress, and therefore a critical target for economic policymakers. In
late December, 2015, Kaushik Basu, World Bank Chief Economist, received
newspaper headlines in India when he reiterated forecasts of growth of 7 to 7.5
percent for India in 2016. The latest Economic Survey of India estimates a
similar rate for the fiscal year 2016-17. But the real issue is what growth rate
India can sustain over a period of at least 5 to10 years.
In 2007, India was growing at over 9 percent, and I presented at the
Brookings Institution in Washington, DC that March, discussing whether India
could maintain that pace. All the studies I examined then, both those based on
detailed statistical analysis and others relying on more informal expert judgment,
suggested that 7-8 percent might be a sustainable medium term growth rate for
India. Subsequently, of course, global economic conditions worsened, and the
fallout has been reflected in slower growth, but the future can always be
different.
In January 2015, I edited a special issue of India Review which included
papers by several prominent economists, again assessing Indias future growth
prospects. Interestingly, the predictions remained close to 8 percent growth, but
with some significant qualifications. The fact that the global economic
environment may be less favourable going forward in the long term and not
just as a result of the recent Great Recession means that India is going to have
to work harder to achieve even 7-8 percent growth, let alone getting to double
digits, as some had hoped for a few years ago. Even sustaining 8 percent growth

Ex-officio Member
Kusum Ketkar

This is based on *A version of this piece was also published in the Financial Express, New Delhi, on January 20,
2016.

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AIEFS Contact: Chandana Chakraborty, Department of Econ. & Finance, Montclair State University, NJ 07043 Phone: (973)-655-4125

AIEFS NEWSLETTER
AIEFS is a non-profit academic organization founded in 1975 at Bloomsburg State University, Pennsylvania

would mean more significant economic policy reforms than had been achieved in recent years,
according to several of the papers in the special issue.
The pure economic drivers of growth remain the same, of course, whatever the global
conditions: investment in public infrastructure, in private equipment and machinery, and in
human capital, along with innovation and adaptation to improve the efficiency of resource use
and what economists call total factor productivity. I would suggest that improvements in
organizational efficiency, in both the private and public sectors, are a vital and possibly
underestimated factor for future Indian growth. The inefficiencies in Indian management in the
left tail of the distribution have been identified in work by Nicholas Bloom and John van
Reenen. The problem of inefficiency in the public sector is more than just state capacity, but
includes organizational structures and incentives, and extends through all levels of government.
Lurking underneath all of these economic and managerial drivers of growth are two
fundamental political dangers. One political danger surfaced in the second UPA government, and
contributed significantly to Indias growth slowdown. The uncertainty about when the leadership
of the Congress party would pass effectively or officially to Rahul Gandhi undermined the thenPrime Minister, in my view, and contributed heavily to internal chaos in the national
government, with various individuals acting as if the official leadership did not matter.
Subsequently, the succession issue has been settled, but it has not led to responsible leadership,
but rather to opposition through tantrums.
A second political danger comes from the identity politics of organizations that surround
the current ruling coalition, encompassing individuals within the government as well. A situation
where classes of citizens are made to feel unsafe or unwelcome in their own country is a recipe
for economic disaster as well as being undesirable in its own right.
In a sense, these are the two biggest downside risks in Indias possible scenarios for
future growth.
In my AIEFS talk, I concluded that it seemed that the technical consensus (assuming that
political disasters are avoided) is for 7-8 percent growth in the medium term, but two prominent
economists in the audience made significant observations. Kaushik Basu suggested that a
recovery of investment rates to match the boom years could support 9 percent growth, more
optimistic than what I had described as the technical consensus. Shekhar Shah, Director of
NCAER in New Delhi, followed this up with another cogent observation: he suggested that 9
percent growth is not only feasible, but that it is necessary. Growth at 7-8 percent might well not
stave off social unrest that could be associated with a failure to create enough decent jobs for
Indias so-called demographic dividend.
The implication of this line of reasoning is that India has to grow faster than 8 percent,
otherwise it might end up growing much slower there may not be any middle ground where the
nation can muddle along, at a neo-Hindu rate of growth. In my view, this puts the political
dangers that I see in India into even starker relief. Political leadership that is based either on
personal petulance or on cultural grievance cannot provide India with the basis for accelerating
its growth rate to the 9-10 percent range that may be required for sustainability. There are dozens
of examples, across all continents, of failures in political leadership precipitating severe social
unrest and profound economic stagnation. The success stories are far fewer. Therefore, India
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AIEFS Contact: Chandana Chakraborty, Department of Econ. & Finance, Montclair State University, NJ 07043 Phone: (973)-655-4125

AIEFS NEWSLETTER
AIEFS is a non-profit academic organization founded in 1975 at Bloomsburg State University, Pennsylvania

may be truly at a crossroads in terms of its economic future, and underlying that, what its
political leadership chooses to do. Much will ride on those choices.

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AIEFS Contact: Chandana Chakraborty, Department of Econ. & Finance, Montclair State University, NJ 07043 Phone: (973)-655-4125

AIEFS NEWSLETTER
AIEFS is a non-profit academic organization founded in 1975 at Bloomsburg State University, Pennsylvania

Call for Papers

The Association of Indian Economic and Financial Studies (AIEFS) is
sponsoring sessions at ASSA 2017, Chicago, IL, January 6 -8 (Friday,
Saturday, Sunday), 2017.
In general, both theoretical and empirical papers on economic growth and development, trade
and finance, economic policy and political economy will be considered. Quality papers on other
topics will also be given consideration. Preferences will be given to papers written in the
context of the Indian economy. Completed paper/or detailed abstract of the paper should be
submitted to Chandana Chakraborty, Executive Director and Program Chair, AIEFS by April
30, 2016. Program committee will be responsible for selecting papers for presentation. Authors
are encouraged to make electronic submissions at chakrabortyc@mail.montclair.edu

All submissions must be accompanied by annual AIEFS membership dues for 2016 and
completed membership form. Those who are either life members or have already paid dues for
2016 are not required to pay dues with their submissions.
Annual membership fee is $40 and students are charged concessional rate of $20.
AIEFS membership form can be downloaded from the website: www.aiefs.org. Membership
dues can be paid electronically from the website. Payments by checks payable to AIEFS would
also be accepted at the address given below.

Paper Submission Guidelines

For those submitting abstract only, it should consist of at least 500 words. Abstract should
include research objectives, review of literature, methodology and sources of data for
empirical papers.
Note: File name of paper/abstract should include the first initial and the last name of the author
and not just AIEFS2017. Example: AIEFS2017ASen.
Following additional Information should be attached with the paper/or abstract on a
separate sheet:
1. Title of the paper:
2. JEL classification of the paper:
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AIEFS Contact: Chandana Chakraborty, Department of Econ. & Finance, Montclair State University, NJ 07043 Phone: (973)-655-4125

AIEFS NEWSLETTER
AIEFS is a non-profit academic organization founded in 1975 at Bloomsburg State University, Pennsylvania

3. Name(s) of the author(s):

4. Affiliation of the author(s):
5. Mailing address:
6. E-mail address(s):
7. Telephone number(s) (r):

(w):

Fax number:

8. Additional/optional willingness to discuss other papers and chair sessions (with areas of
interest and specialization)

Deadline: April 30, 2016

If the electronic option is not chosen, the required information and checks can be mailed to:
Professor Chandana Chakraborty
Executive Director and Program Chair
Department of Econ. & Finance
Montclair State University
Upper Montclair, NJ 07043
E-mail: chakrabortyc@mail.montclair.edu
Phone :( 973) 655-4125

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AIEFS Contact: Chandana Chakraborty, Department of Econ. & Finance, Montclair State University, NJ 07043 Phone: (973)-655-4125

AIEFS NEWSLETTER
AIEFS is a non-profit academic organization founded in 1975 at Bloomsburg State University, Pennsylvania

Membership Application Form

ASSOCIATION OF INDIAN ECONOMIC AND FINANCIAL STUDIES
(AIEFS)
Department of Economics, Rochester Institute of Technology
90 Lomb Memorial Drive, Rochester, NY 14623-5604
aabgsh@rit.edu

(Please type or write everything in capital letters)

Name: _______________________________________________________________________
Affiliation: ___________________________________________________________________
Mailing Address: ______________________________________________________________
________________________________________________________________
Phone: ( ) --------- ---------- (H); Phone: ( ) ----- ---------- (W); Fax: ( ) -------- -----------.
e-mail: ______________________________________________________________________
Areas of interest/specialization:
(1)___________________ (2)___________________(3)___________________
If you plan to participate in any AIEFS programs, as paper presenter/discussant, please
indicate your preference:
O 1. AIEFS biennial conference, held generally in summer months every other year (next
one due in 2015)
O 2. AIEFS-sponsored occasional seminars
O 3. AIEFS sessions at Eastern Economics Association, generally in February/March
every year
O 4. AIEFS sessions at ASSA, held generally in the first week of January every year
O 5. Contribute short, 1-2 page articles to the AIEFS Newsletter, occasionally or on a
regular basis
Please check the membership category you have chosen.
____ Life ($ 350), ____ Full ($ 40), ____Family ($ 50),____ Student ($20)
(Except Life, all other categories of membership are for a calendar year)
Kindly make the check payable to the Association of Indian Economic and Financial Studies
(AIEFS) and mail it, along with this completed form to the Executive Director at the address
below:
Chandana Chakraborty
Department of Economics & Finance
Montclair State University
Upper Montclair, NJ 07043

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AIEFS Contact: Chandana Chakraborty, Department of Econ. & Finance, Montclair State University, NJ 07043 Phone: (973)-655-4125

AIEFS NEWSLETTER
AIEFS is a non-profit academic organization founded in 1975 at Bloomsburg State University, Pennsylvania

About AIEFS
AIEFS regularly sponsors sessions at the annual ASSA, Western Economic Association and
Eastern Economic Association meetings. It also holds biennial meetings either in the US or in
India. First biennial meeting in India was held in collaboration with t he Research and Information
System for Developing countries (RIS) in June 2009 in Delhi. The 2013 biennial meeting was
held in collaboration with the Indira Gandhi Institute of Developments Research (IGIDR) in Mumbai.
The 2015 biennial meeting has been scheduled to be held in the University of Hyderabad, Hyderabad,
India during August 3-4, 2015.
AIEFS brings out Newsletter twice a year fall and in spring. From time to time, AIEFS also
publishes edited books or proceeding of papers presented at ASSA and biennial meetings. In recent
years, papers have been published in special issues of peer reviewed journals like South Asia
Economic Journal, International Journal of Economic Policy in emerging Economies and
International Journal of Business and Emerging Markets.

For further information of AIEFS or to become a member, please visit the website:
www.aiefs.org. Or contact executive director:
Chandana Chakraborty, Ph.D.

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AIEFS Contact: Chandana Chakraborty, Department of Econ. & Finance, Montclair State University, NJ 07043 Phone: (973)-655-4125