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India: Progress is being made, but is it good enough?

The Indian FlagOn 6th September Urjit Patel took over from Raghuram Rajan as the new Governor of the Reserve Bank of India. Prior to his new role Patel was the Deputy Governor and played a major part in making key changes to the monetary policy in India, such as inflation targeting and reforming the system by which prices are set. The appointment of Patel has inspired confidence amongst a number of Indians as many believe he will be able to steer the country’s economy in the right direction and ensure that the 4% inflation target is met.

As a person of Indian origin, it is encouraging to see that the country is beginning to focus on trying to meet its core economic objectives and ensuring that a well devised strategy and plan is in place. However, while the country has taken a step in the right direction, much more rapid progress and reform is needed. Despite achieving high rates of economic growth over the last 20 years, economic benefits have not been reaped by many sections of Indian society. In theory, high rates of economic growth should cause a trickle down effect, which would benefit society as a whole. Increases in GDP per capita would lead to greater incomes and expenditure, which should consequently lead to growing demand, resulting in greater job opportunities and increased wages. However due to large income inequality within India resources have not been distributed fairly and equitably, and as a result only those with a large number of assets have benefited – the trickle effect has not successfully taken place.

The Government needs to reform its policies by building bottom up before pursuing economic growth and should focus on achieving fairer distribution of resources and helping those in need. The Government could start by investing its resources towards strengthening public services, to ensure that those in need are able to access better quality healthcare, education and support. Indeed such structural reform will take time to be effective and have a major impact, but if implemented correctly it could help many people by providing them with the skills and foundations that they need to support themselves. Hence by building from the bottom up, it could lead to a greater availability of skilled workers and reduced poverty, both of which could help stimulate a process of economic growth within India.