Montek S. Ahluwalia

Economic Reforms in India Since 1991: Has Gradualism Worked?

Opinions on the causes of Indias growth deceleration vary. World economic growth was slower in the second half of the 1990s, and that would have had some dampening effect, but Indias dependence on the world economy is not large enough for this to account for the slowdown. Critics of liberalization have blamed the slowdown on the effect of trade policy reforms on domestic industry. However, the opposite view is that the slowdown is due not to the effects of reforms, but rather to the failure to implement the reforms effectively. This in turn is often attributed to Indias gradualist approach to reform, which has meant a frustratingly slow pace of implementation. However, even a gradualist pace should be able to achieve significant policy changes over ten years. This paper examines Indias experience with gradualist reforms from this perspective.

Growth and poverty in developing countries

A quantitative framework for projecting levels of poverty under different assumptions about GNP growth, population growth, and changes in income distribution is described. Differences in distributional policies have been at least as important to poverty alleviation as differences in aggregate growth rates. A marginal share for the lowest 60 percent of income recipients of approximately 40 percent is as high as has been observed in countries in which growth has been sustained at reasonable levels. Substantial improvements in income distribution have taken place under a variety of policies. The model indicates that it is possible to design national and international policies to eliminate the lag between growth of income of the poor and growth of the developing country as a whole. However, such results would require substantial modification of both national and international policies that are unlikely to take place without a considerable reordering of social priorities. Economic data are included. 36 references.

Rural poverty and agricultural performance in India

Time-series evidence on rural poverty over the past two decades in India is examined. In general, the time series shows a pattern of fluctuation, with the incidence of poverty falling during periods of good agricultural performance and rising during periods of bad performance. The incidence of poverty in all of India is inversely related to agricultural performance measured in terms of agricultural NDP per rural person. This correlation between poverty and agricultural performance suggests that faster agricultural growth might have led to reduced poverty rates. The state level analysis demonstrates a similar significant inverse relationship in at least seven states, accounting for 75 percent of the rural poor. On the other hand, state level analysis also shows that there may be a process at work in the rural economies that tends to increase poverty over time. The existence of an underlying force within the rural economy is extremely important. The nature of these forces, their variation across states, and technique to mitigate their effects require further analysis. Statistical data are included. 20 references.

India's quiet economic revolution

Abstract Montek S. Ahluwalia, Secretary of the Indian Finance Ministry, is one of the major architects of Indias program of economic liberalization. Since June 1991, he has worked on gradual reforms that have enabled Indias once floundering economy to “turn the corner” where other countries trying to reform more rapidly have not. Based on budget figures that the Finance Minister, Dr. Manmachan Singh presented to the Indian Parliament on February 28, 1994, Mr. Ahluwalia reviews the governments reforms in the tax, public, financial, and industrial sectors, in trade and exchange policies, and also examines the progress India has made toward macroeconomic stability.

Reforming the global financial architecture

A report prepared for the 1999 Commonwealth Finance Ministers Meeting, discussing the reform of international financial architecture. It argues that contemporary crises are very different from traditional balance of payments problems, and that developing countries are especially vulnerable. Six areas of discussion have been identified, some well known, others involving new initiatives. The report also identifies issues in the area of crisis resolution. It looks at the role of the Fund; incentives for the private sector; measures to deal with imprudent creditors and the design of adjustment programmes. It concludes by proposing a new governance structure.

India's Experience with Globalisation

No abstract available.

Understanding India's Reform Trajectory: Past Trends and Future Challenges

The May 2004 elections in India provided a dramatic demonstration of that core element of democracy – voters can change governments. This has important implications for whoever is managing the process of policy change in India. It must be done in the context of a very genuine democratic process operating at both the state level and the national level. This means that reforms must have a sufficient consensus to ensure continuity and they must be seen to have benefited a sufficiently large percentage of the population if governments are to receive electoral endorsement from time to time. These considerations explain a great deal about the nature of policy reforms in India and also the nature of the political debate which typically heats up before and after election. They are relevant to understand some of the debate on economic policy associated with the May election. Let me first comment briefly on the nature of policy reforms in India. I have written elsewhere – and one of the papers prepared for this symposium mentions this1 – that the pluralistic character of Indian politics led to the choice of gradualism in the implementation of reforms. Gradualism has both advantages and disadvantages. The advantage is that it enables the government to build a consensus on reforms which moderates opposition to the reform and also helps

Structural Adjustment and Reform in Developing Countries

The past ten years have seen a remarkable convergence of views among all segments of the development community — policy makers, academics and the major multilateral institutions — on what policies are good for development. The convergence is reflected in the near universal trend towards trade liberalization and greater openness to foreign investment, greater reliance upon market forces in both the real and financial sectors, and a reduction in the role of the public sector in favour of the private sector, all underpinned by a sustained pursuit of macroeconomic stability through low fiscal deficits. These are the common ingredients of programmes of structural adjustment and economic reform being implemented all over the developing world.

Taxes, Subsidies, and Employment

I. The equilibrium of a surplus labor economy, 394. — II. The role of commodity taxation, 398. — III. The role of general factor taxation subsidy, 401. — IV. Factor taxation subsidy in one industry, 403. — V. Conclusions, 407.

Redistribution with Growth: The Economic Framework

A major activity of IDS during the 1970s was participation in three Employment Missions of the ILO’s World Employment Programme—the first two led by Dudley Seers to Colombia and Sri Lanka. The third, led by Hans Singer and Richard Jolly, went to Kenya, resulting in the ILO publication Employment, Incomes and Equality (ILO, 1972). Central to the policies proposed was the idea of Redistribution from Growth, a strategy first formulated by Hans Singer as a means to reduce poverty at an accelerated rate by combining a measure ofprogressive redistribution of the increments of income from growth into assets of the poor (education and health as well as physical investments) which would directly add to the production of the poorest groups over the medium to longer term. A year later, IDS joined with the World Bank to produce a study generalizing the strategy as Redistribution with Growth. The elements of the strategy were set out in the joint IDS-World Bank Publication. Three economists from IDS and three from the World Bank took part in the study. Hollis Chenery, Vice President, Development Policy, of the World Bank was senior author and wrote the introductory summary with Montek Ahluwalia, at the time a Division Chief, Income Distribution Division of the World Bank.