282
The Great Recession and Developing Countries
Concluding Remarks: Policy and Institutional Underpinnings of India’s Faster Growth and Prospects for the Future From a comparative standpoint, one of the enduring puzzles of India’s recent growth spurt (FY03–FY08) before this crisis, and the one that is now emerging, is the role that policy and institutional reforms play in driving and sustaining such growth accelerations. This chapter has alluded to one key strength of India’s institutional setting: its well-established policymaking setting and its ability to learn from its own history and that of others. However, the question persists: was India’s recent growth acceleration of FY03–FY08 due merely to “good luck” or to accelerated reform? And if such reforms are fundamental, what are the key challenges ahead if India is to sustain its recovery from this crisis? While these were not the main questions directly framed to the authors by the organizers of this book, later peer reviews have suggested that we at least provide some possible pointers to readers and researchers. We therefore address this topic in conclusion with three or four broader observations that might be helpful. The first is that there is as yet no settled answer, either generally or in India’s particular case, as to why growth accelerations occur and what sustains them. A body of work is still evolving, after the earlier work, for example, by Hausmann, Pritchett, and Rodrik (2004), which noted both the existence and the importance of such growth accelerations and their relative rarity. In India’s case, the argument still rages as to whether the growth acceleration started in the 1970s, in the 1980s, or in the 1990s. As we have argued, what is much more interesting in India’s case is that growth crises have been periodic, and the ability of policy makers to produce growth accelerations after such pauses is far more interesting than when they have happened. We argue, furthermore, that is it is not any single body of Washington-style consensus economic reforms that produce better results, but the ability of policy makers to address the most critical constraints to growth at any one point of time—be it food and agriculture, services, labor markets, or infrastructure—combined with the confidence and ability of its larger public and private sector settings to respond to such reforms. The second is that there is very little doubt that India’s growth spurt in the FY03–FY08 period was a major event because of its strength (doubling per capita growth from the previous 3 percent to about 6–7 percent currently) in relation both to its own history and to that of comparators