This visionary and thought-provoking study is a must read for political leaders, policymakers, business executives, and leaders of civic society interested in India's long-term development. It presents a much needed longer term vision of Indian society and economy within which today's policy debates and actions must be anchored. The volume presents a persuasive case that if India succeeds in sustaining its recent economic success over the longer term (as many East Asian economies have done in the past), India can realistically aspire to become an affluent society within one generation. The study is being released just as the new Indian government is taking office in a political environment that presents a truly unique opportunity to put India into a longer term sustained growth trajectory with financial stability.
Chapter 2: Realizing the Potential: Avoiding the Middle Income Trap
Realizing the Potential: Avoiding the Middle Income Trap
[Page 30][Page 31]Few countries sustain high growth for more than a generation, and even fewer continue their high growth rates once they reach middle income status. The Commission on Growth and Development's recent review of growth in developing countries identified just 13 countries that sustained growth of more than 7 percent for at least 25 years in the postwar period.1 They have five common characteristics: openness to the global economy in knowledge and trade; macroeconomic stability; a “future orientation,” exemplified by high rates of saving and investment; a reliance on markets and market-based prices to allocate resources; and leadership committed to growth and inclusion with a reasonable capacity for administration. ...