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Devesh Kapur & Arvind Subramanian: Rebuilding the Indian state

Both growth and inclusion need a capable Indian state

Devesh Kapur & Arvind Subramanian

The ongoing economic travails in India arise from a combination of severe macroeconomic difficulties and a sharp deceleration in the trend rate of economic growth. Macroeconomic difficulties originate in the unsustainability of the redistribution agenda - reflected in high fiscal deficits, which have led to high inflation and widening current account imbalances. The Indian growth model, emphasising skill-intensive services at the expense of unskilled labour-intensive manufacturing, may be running out of steam because the skilled are scarce and the unskilled are underemployed in ...