Hindustan Times ⁽²⁾

With the reforms undertaken during the last two decades, the fate of the Indian economy is now intimately linked to that of the world economy. Arvind Panagariya examines. Read full article Until as recently as 1990, India was essentially insulated from the world markets. With foreign trade and foreign investment amounting to a tiny proportion of the GDP, ups and downs in the world economy mattered little. Movements in the Indian economy were even less consequential for the world economy — India accounted for negligible proportions of world trade and investment. But the reforms undertaken during the last two decades have dramatically transformed the policy regime with the result that the fate of the Indian economy is now intimately linked to that of the world economy. In the reverse, the world economy has also come to depend on the Indian economy, though to a lesser extent. This is because India is still small relative to the world. But this too is changing rapidly. To grasp the transformation that has taken place, consider just a few facts: n Trade in goods…

If we go by the latest census data, as late as 2001, 77 per cent of India's population lived in rural areas and 59 per cent earned its living from farming. Given farming generates less than a quarter of the national income, it offers a significant proportion of the farmers barely the subsistence income. I have argued for some time now that if India is to transform itself from this primarily agricultural to modern economy, it must walk on two legs: unskilled-labor-intensive manufacturing and skilled-labor-intensive services (Hindustan Times, 29 Jan 2006) If we go by the latest census data, as late as 2001, 77 per cent of India's population lived in rural areas and 59 per cent earned its living from farming. Given farming generates less than a quarter of the national income, it offers a significant proportion of the farmers barely the subsistence income. I have argued for some time now that if India is to transform itself from this primarily agricultural to modern economy, it must walk on two legs: unskilled-labour-intensive manufacturing and skilled-labour-intensive services. The former, which…