The episode provides an in-depth analysis of the structural challenges that led to the slowdown in private investment in India from 2011, highlighting the impact of policy uncertainty, weak rule of law, and central planning on business confidence. Ajay Shah advocates for broader policy reforms that enhance the institutional environment, making it more conducive to private sector participation in the economy.
He also discusses the strategic importance of fiscal discipline in the context of India's economic challenges. He emphasizes the need for a prudent approach to deficit management, arguing that a flexible fiscal policy, which adapts to economic cycles, is more suitable for India than rigid deficit targets. The discussion also explores the role of infrastructure investments, questioning whether the current government-led infrastructure push effectively addresses the deeper issues of private sector investment and economic growth.
Additionally, Shah touches upon the ongoing debate around tax policy, particularly the potential overhaul of India's direct tax code and the implications of capital gains taxation. He underscores the importance of aligning tax policy with the broader goal of promoting capital formation and economic growth in India.
How can India balance fiscal discipline with the need for economic growth? What are the underlying reasons for the private sector's reluctance to invest in India? How can tax policy reforms contribute to India's economic objectives?
Additional Readings
In Service of the Republic: The Art and Science of Economic Policy by Vijay Kelkar and Ajay Shah
Foreign Investors Under Stress: Evidence from India by Ila Patnaik, Ajay Shah, and Nirvikar Singh
Scale Economies, Product Differentiation, and the Pattern of Trade by Paul Krugman
The Case for Trade Barriers Against Chinese Imports by Ila Patnaik and Ajay Shah
The State of the Economy by Ajay Shah
Government Programs Have a Limited Impact on Employment by Ajay Shah
Where Has All the Infrastructure Gone? | Episode 55 | Everything is Everything
Strategic Thinking on Fiscal Policy by Ajay Shah
Where Has All the Infrastructure Gone? | Episode 55 | Everything is Everything
Episode Contributors:
Ajay Shah is a senior research fellow and co-founder of XKDR Forum. He has held positions at the Centre for Monitoring Indian Economy (CMIE), the Indira Gandhi Institute for Development Research (IGIDR), the Department of Economic Affairs at the Ministry of Finance, and the National Institute for Public Finance and Policy (NIPFP). His research lies at the intersection of economics, law, and public administration.
Suyash Rai is a deputy director and fellow at Carnegie India. His research focuses on the political economy of economic reforms, and the performance of public institutions in India. His current research looks at the financial sector, the fiscal system, and the infrastructure sector.
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