Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries

Until recently, India was enjoying a period of near-double-digit annual growth, accompanied by a rapid decline in poverty. But then, its economy stalled, stymied by political disagreements over the best ways to reduce poverty -- through direct government action or through the indirect effects of growth -- and over the degree to which the country should engage with the global economy. Both debates are shaped by strong sentiments in favor of protecting local businesses and workers -- a residue of India’s socialist past. Against such views, Bhagwati and Panagariya advocate for growth through increased trade with the world and more foreign investment in India. They confront what they consider to be 19 myths about the Indian economy, ranging from the claim that Indian planners pursued growth as an end in itself, ignoring poverty reduction, to the belief that post-1991 reforms of the Indian economy increased government corruption and resulted in a high incidence of suicides among farmers. Demolishing those myths, the authors propose ways to accelerate India’s growth while also making its redistributive policies more effective. Although India provides the specifics for their arguments, their analysis and prescriptions would apply to many other countries, as well.

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