The Columbia Business School's Chazen Institute of International Business at New York's Columbia University has been given a $3.5 million grant to establish a research programme on Indian economic policy.
'The Indian economy is at a crossroads,' says Professor Jagdish Bhagwati, a University Professor at Columbia University and senior adviser to the Institute.
'India is moving from the completion of conventional economic reforms like removing industrial licensing requirements to what Professor Bhagwati calls 'second-generation reforms' in areas like health care and education.
Just how the country's leaders should proceed is a question that Professor Bhagwati and his colleague Arvind Panagariya, Jagdish Bhagwati Professor of Indian Political Economy at Columbia, will examine over the next four years with the support of the grant provided by the John Templeton Foundation.
Panagariya said the programme -- Indian Economic Policies: Free Trade, Democracy and Entrepreneurial Development -- has been launched recognising the rising importance of India in the global economy.
"The liberalisation we have already undertaken combined with other favorable factors like high savings rate, a young population that is predicted to get younger and a very vibrant entrepreneurial class already promise a 7 to 9 percent growth rate in the next couple of decades. But we could do better, growing 9 to 12 percent a year with further reforms," Professor Panagariya told rediff India Abroad.
"These include a wholesale clean up of labour laws, laws governing land transactions in both rural and urban areas, a proper exit policy for firms, a wholesale reform of higher education policy and improvements in the quality of primary education, reform of the electricity sector, building of infrastructure including urban infrastructure, redirecting and redesigning our subsidy programmes to serve the poor better, tax reform, civil service reform, privatisation of public sector manufacturing units, continued liberalisation of the financial sector, bringing down public debt, and major reforms in the health sector," Professor Panagariya said.
The research will cover five major subjects - poverty, equality, and democracy; specific economic sectors like trade and agriculture; macroeconomic problems, ranging from deficits and debt to capital convertibility; social policy, especially health and education; and economic policy-making among the Indian states.
Professors Bhagwati and Panagariya expect papers generated by the programme to be published in leading professional journals, but they also hope to reach a broader audience with edited volumes and special reports.
'Interest in the Indian economy is high right now,' Professor Panagariya told the Templeton Foundation's newsletter. 'Students and faculty at Columbia are very keen on it. No one mentions China by itself anymore,' he said.
Noting that entrepreneurs and investors are also interested in India's expanding market, he said 'as the Indian middle class grows and we learn the patterns of expenditures, we can predict what kinds of products will be in demand.'
Ultimately, according to Professor Panagariya, the new programme is intended to inform and influence policy in India. He pointed to labour market laws as an area in particular need of reform. 'If a firm has more than 100 workers,' he said, 'it is almost impossible to lay off anyone, even if you're going bankrupt.'
Laws concerning land acquisition are another problem. He noted that Tata Motors, a division of India's largest and most successful multinational, recently had to scuttle plans to build a plant in West Bengal because the review process there is so vulnerable to political pressure. At the state level, he also sees a vast need for reforms in primary education, health, electricity, and rural transportation.
"We do have a long road ahead in so far as reforms are concerned," Professor Panagariya said. "In comparing with China, we are ahead in being a stable democracy. Our reforms have also progressed farther in the financial sector. Public sector dominance may well be even higher in China. But in many other areas, notably labour market flexibilities, higher education and health outcomes, China is ahead."
Mauro De Lorenzo, vice president for freedom and free enterprise at the Templeton Foundation, believes the outcome of India's economic transformation is 'more consequential than that of any other in the developing world because of the durability of Indian democracy.'
Professors Bhagwati and Panagariya, he said, 'understand that the real locus of change -- or stagnation -- in India lies at the juncture of politics and economic policy-making.'
Leading researchers from Columbia and other universities and think-tanks in the US and India will participate in the programme that will examine India's remarkable economic growth and its transformation into a modern economy by establishing a data centre, conducting field research, building an extensive Web site, and providing advice for economic reforms to policy makers in India.
The programme intends to expand into a permanent centre for the study of the Indian economy at Columbia through an endowment to be raised during the next four years.