Abstract

India’s recent macroeconomic performance has revived an old but consequential question: Has the country entered a structurally higher growth phase? Over the past few years, India has recorded growth upwards of seven per cent while inflation has moderated and the external balance has been within safe limits.

Historically, India has oscillated between two uncomfortable growth patterns: rapid growth that collided with inflation and external imbalances, or macroeconomic stability achieved at the cost of slower growth.

The current ‘Goldilocks’ combination of relatively strong growth with macroeconomic stability – unusual in India’s economic history – has led many analysts to argue that the economy may have shifted to a higher and more durable growth trajectory.

Several structural developments support the optimistic view. Macroeconomic management has improved with the adoption of flexible inflation targetting a more credible fiscal consolidation framework and moderate external imbalances. Important institutional reforms have strengthened the policy architecture. Also, India’s digital public infrastructure, built around the Aadhaar, Unified Payments Interface and direct benefit transfers, has reduced transaction costs and deepened financial inclusion. A sustained public investment push in infrastructure has also eased long-standing supply bottlenecks.

Yet it may be premature to declare a structural shift. Private investment has not yet revived convincingly, employment generation remains weak relative to output growth and the sustainability of a growth model driven largely by public investment is questionable. Importantly, evidence of productivity improvement is uncertain.
The seminar will discuss both sides of this debate.

About the Speaker

Duvvuri Subbarao (Subba) served as Governor of the Reserve Bank of India (RBI) for five years (2008-2013). As a career civil servant earlier on, he was Finance Secretary to the Government of India (2007-2008) and Secretary to the Prime Minister’s Economic Advisory Council (2005-07). He was a Lead Economist in the World Bank (1999-2004).

After stepping down from the RBI, Dr Subbarao was a Distinguished Visiting Research Fellow at the Institute of South Asian Studies (ISAS) at the National University of Singapore (2014-19) and later at the University of Pennsylvania. Most recently, he has been visiting faculty at Yale University School of Management. He is also an Honorary Senior Fellow at ISAS as well as an occasional Visiting Fellow at the S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore.