Indian economy: Myth and reality
Description
Dr. R. Vaidyanathan, Professor of Finance at IIM Bangalore and Dean of the Centre for Economic Studies at the Vivekananda International Foundation (VIF), delivered a thought-provoking talk titled “Indian Economy: Myth and Reality” on June 30, 2015, under the aegis of VIF’s monthly Vimarsha lecture series. In his opening remarks, General N. C. Vij, Director of VIF, presented an overview of the first year of the Modi-led NDA government at the Centre. Summarizing its performance, he described it as a mixed outcome of successes and challenges. While the government performed strongly on the international front—Pakistan being a notable exception—its domestic performance was yet to translate fully into tangible results. However, he highlighted the e-auctioning of coal mines as a widely appreciated reform measure. General Vij emphasized that, given the high public expectations and the significant challenges facing the government—particularly in generating employment for millions of youth annually and improving the quality of education and healthcare—it would be prudent to adopt a wait-and-watch approach rather than pass premature judgment. Professor Vaidyanathan, an expert on the Indian economic model, began his lecture by discussing the impending crisis in the Eurozone, triggered in part by the Greek debt crisis, and its implications for India. He observed that many major global crises over the past 1,500 years have originated in Europe, and argued that the contemporary sovereign debt crisis in the Eurozone is largely driven by declining household savings. He also predicted a decline in the economic dominance of G20 countries by 2020. With global economic power shifting toward the East, he suggested that India is well positioned to emerge as a preferred destination for private equity and overseas pension funds. His talk, delivered with sharp wit and humor, engaged the audience throughout. Professor Vaidyanathan challenged several commonly held perceptions about the Indian economy. Contrary to the belief that the corporate sector is the primary driver of economic activity, he argued that the real engine of India’s economy is the vast number of self-employed individuals in the unorganized sector, whose contribution to household savings is substantial. Accordingly, he emphasized that ease-of-doing-business initiatives should focus more on this segment. He also questioned the perception of the stock market as an accurate barometer of the Indian economy, noting that it captures only a small fraction of national savings, with the majority flowing through other financial channels. His lecture covered a wide range of topics, including the nature of India’s economic structure, the roles of foreign direct investment (FDI) and foreign institutional investment (FII), savings patterns, the role of gold, funding of unincorporated enterprises, market access, and political linkages. These complex issues were explained in a clear and accessible manner. Professor Vaidyanathan also offered policy advice to the government. Criticizing the extensive debate surrounding the Land Bill, he suggested that the controversy was unnecessary and recommended that the responsibility for land-related incentives be left to state governments. He argued that states offering more attractive incentives would naturally attract greater investment, thereby encouraging others to follow suit. The lecture concluded with an engaging interactive session between the speaker and the audience.
Copyright Date
January 2015
Publication Date
1-1-2015
Keywords
Economics, Indian economy
Conference
13th July, 2015, Vivekananda International Foundation, New Delhi
