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How to finance social protection in developing countries in the age of COVID-19

Jayati Ghosh

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The world is now in the grip of an unprecedented crisis, with the spread of the Covid-19 pandemic and the very adverse economic impact of containment measures. The pandemic has highlighted something that had been almost forgotten by policy makers across the world in the past few decades; the importance of expenditure in public health and social protection systems.

These protect not just those who are traditionally seen as beneficiaries, but everyone in society. Pandemics expose the basic truth that as long as anyone anywhere has a contagious disease, everyone everywhere is at risk. Universal health coverage is not about compassion but the survival of all. Policies of reducing government expenditure on health services have been shown to be fundamentally flawed, generating major vulnerabilities in societies and economies.

COVID-19 has not been a great leveller. Rather, it has already sharply increased global inequality, both between and within countries. Containment measures like lockdowns and mobility restrictions also have unequal effects. Informal workers tend to be the worst affected because of a lack of legal and social protection. Since the enforced closures also affect supply, there are concerns about rising food prices and shocks to food security, even among those not considered “poor”.

The need for adequate social protection on various fronts has never been more evident and urgent. But these large demands on public fiscal resources are coming just as most developing countries are facing a terrible combination of rapid declines in export and tourism revenues, and capital outflows. While most developed countries are instituting large fiscal stimulus packages, this is much more difficult for developing countries.

For them, policy space is reduced by external constraints on the balance of payments and by fears of capital flight. Estimates of the financing needs of developing countries have been in the range of US$2.5 trillion (1) while the immediately-required increase in health spending has been projected at anywhere between US$160 billion (2) and US$500 billion (3). How is this to be achieved?

Most fiscal packages in advanced countries require a substantial amount of monetised deficit (borrowing by the state from the central bank). This is also possible in developing countries. Internally, there are possibilities to raise tax revenues through wealth taxes. In most countries even a low tax rate of 3 per cent applied to just the top 0.1 per cent of the population could yield significant revenues. Implementing the proposal for unitary taxation of multinational companies would also generate substantial revenues.

Developing countries have much less flexibility with regard to foreign exchange. The international community has to step in, through immediate changes that enable a swift increase in resources. Such new finance must be compensatory in nature and avoid policy conditionalities (which have had, at best, mixed success in the past and cannot be insisted upon at a time of global recession and health hazards).

Within the existing financial architecture, a measure that is immediately possible is a large new issue of Special Drawing Rights (SDRs) by the IMF. These are reserve assets created by the IMF (as a weighted basket of five major currencies) to supplement the official foreign exchange reserves of countries. They create additional liquidity at no extra cost and are not loans.

A second required measure is a standstill on all debt repayments (both principal and interest) for one year, or until debt restructuring packages are worked out, as countries cope with both the spread of the disease and the lockdown effects. This is essential because as much as $1.6 trillion of developing country external debt is due to be repaid in the current year, with a further $1.1 trillion due in 2021.

All this requires greater international solidarity than is currently evident. But if there is one message from the pandemic that we cannot ignore (and which is even more significant when it comes to dealing with climate change), it is that the absence of such solidarity will affect people across all nations badly. Unprecedented existential threats require unprecedented and globally co-ordinated responses.

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The International North-South Transport Corridor: Shifting Gears in Eurasian Connectivity

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As the centre of gravity of the global power play tilts towards its economic underlining,

issues like trade, connectivity and infrastructure have come to warrant greater significance in foreign policies. This holds particularly true in Central Asia where the need for investment coupled with its strategic geographical stretch has drawn increasing attention towards the potential of transport corridors as catalysts of economic integration and connectivity. While China’s colossal Belt and Road Initiative (BRI) has been at the centre of global attention, India, Iran and Russia have mapped out their own plans for a transcontinental transport corridor. The International North-South Transport Corridor (INSTC) is a landmark initiative for Eurasian connectivity. Twice as short as the traditional trade route between India and Russia, the corridor augments economic cooperation and gives sea access to land-locked member states in Central Asia. This paper seeks to advance an understanding of the development of the INSTC and examine its significance in the Asian transportation grid. In doing so, it analyses the geopolitical dynamics that underlie the project’s agenda, examines it in the context of the BRI, explores the stumbling blocks in its developments and comments on its future prospects while highlighting some recommended policy changes.

Bridging the Connectivity Gap

The International North-South Transport Corridor is a 7200 km-long multimodal transportation network that links the Indian Ocean to the Caspian Sea via the Persian Gulf onwards into Russia and Northern Europe. Launched as a joint initiative by India, Iran and Russia in 2000 and ratified by the three in 2002, the corridor has now expanded to include eleven more members, namely, Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Syria, Belarus, Oman and Bulgaria (observer status). The 2000 agreement was set in motion with the objectives of simplifying and developing transportation services, enhancing access to global markets and coordinating transit policies while also ameliorating route security. India’s accession to the Shanghai Cooperation Organisation (SCO) in 2017 and the Ashgabat Agreement in 2018 have only increased these connectivity prospects.

Figure 1: The INSTC route and the standard Suez route. Credit: Wikimedia Commons

Although the original agreement envisaged connecting India and Iran to Central Asia and Russia, the potential of the corridor to gradually envelop the Baltic, Nordic and even the Arctic regions is no longer far-fetched. The first or the central branch of the corridor of the INSTC begins from the Mumbai port in the Indian Ocean Region and connects to the Bandar Abbas and Chabahar ports on the Strait of Hormuz and then passing through the Iranian territory via Nowshahr, Amirabad and Bandar-e-Anzali, runs by the Caspian Sea to reach the Olya and Astrakhan Ports in Russia. The second or the western branch connects the railway network of Azerbaijan to that of Iran via the cross-border nodal points of Astara (Azerbaijan) and Astara (Iran) and further to India via sea route. The third or the eastern branch of the corridor connects Russia to India through the Central Asian countries of Kazakhstan, Uzbekistan and Turkmenistan. Notably, the INSTC is multimodal in nature, encompassing sea, road and rail routes in its network to offer the shortest route of connectivity for Eurasian cargo transport. Bereft of the INSTC, cargo between India and Russia moves either through the Netherlands’ port of Rotterdam or China’s Qingdao port which takes over 50 days for transit. The INSTC in its completion cuts this transit time down to about 16-21 days. It also offers a considerably shorter route than the Suez Canal transit passage which, besides being overloaded, is also much more expensive than the former. This was made apparent by the dry run conducted by the Federation of Freight Forwarders’ Association of India (FFFAI) in 2014 with the objective of discerning structural problems and missing links in the corridor. The study demonstrated that the INSTC was 30 percent cheaper and 40 percent shorter than the traditional Suez route, slashing the transit time to an average of 23 days for Europe-bound shipments from the 45-60 days taken by the latter. Although the study identified streamlining and coordination with allied agencies as some of the pitfalls, it ascertained that the corridor did not pose infrastructural or security hurdles in the maiden dry run. The second dry run, reportedly conducted in 2017, generated a similar sense of optimism.[1]

With an estimated capacity of 20-30 million tons of goods per year, the corridor facilitates transit and bolsters trade connectivity. But besides the more obvious benefits of increased trade, the time and cost savings coupled with access to new markets also translate into increased competitiveness in exports. This holds particularly true for the INSTC because unlike the BRI, the INSTC nations have a level-playing field, allowing for benefits to be distributed more evenly. For India, the corridor also augments its ‘Make in India’ initiative. Access to nations of the Eurasian Economic Union alone can offer it a market of 173 million people. Additionally, the corridor facilitates free trade agreements, opens new opportunities to engage with more regional trading blocs and in harmonising policies while bringing about a more uniform legal climate and enhances regional stability. 

Geopolitical Geometries

The INSTC acts as a gateway for India to reconnect with the resource-rich nations of Central Asia and Eurasia. It makes for one of the most salient aspects of India’s Connect Central Asia policy which was initiated by Indian policy markers in 2012 in a bid to revamp its ties with Central Asia. In a way, the INSTC serves the more proactive stance that the Indian foreign policy has come to adopt in recent years. For a long time, India’s westward connectivity had been disrupted by its contentious relations with Pakistan. In providing a direct link to the Iranian ports of Chabahar and Bandar Abbas, the INSTC allows the nation to bypass the Pakistan hurdle. Furthermore, it presents India with an opportunity to re-engage with Russia which, in the light of India’s increasingly cordial relations with the United States, has been advancing its relations with Pakistan. In 2018, bilateral trade between India and Russia stood at USD $8.2 billion, a dismal amount compared to the envisaged target of US $30 billion in bilateral trade by 2025. The need to re-energize trade coupled with the lack of a coterminous border renders the INSTC imperative for the two.

The INSTC also makes way for India to offset growing Chinese presence in the region. The partly Indian-built port of Chabahar in Iran is not only central to India’s connectivity to Central Asia but also holds significant strategic importance. Located just 72 kilometres west of the Pakistani port of Gwadar which has been developed under the BRI, Chabahar allows India to counter the Chinese strategic foothold in the Indian Ocean Region. The port is also pivotal for land-locked Afghanistan to unlock its trade potential and reduce its dependence on Islamabad. In this context, it is worthwhile to note that, positioned at the crossroads of the North-South and East-West transit corridors, Iran is the lynchpin to the success of the INSTC. Isolation of Iran in the wake of the U.S. sanctions then can inevitably put the actualisation of the INSTC in jeopardy. However, the signing of an MoU between the state-backed Container Corporation of India (Concor) and Russian Railways Logistics Joint Stock Company (RZD) in 2020 to transport cargo via the INSTC despite the threat of U.S. sanctions indicates a promising outlook for the full operationalisation of the corridor.

The geopolitical geometries of the INSTC are complicated not only by tangled relations with extra-regional players but also amongst the members themselves. Azerbaijan’s accession to the INSTC in 2005 spurred the corridor’s spread in the Caucasus and heralded the bridging of missing links like the Qazvin-Rasht-Astara railway line. Anticipating up to seven million tons of cargo transit through its territory in the medium term, Azerbaijan has agreed to finance $500 million for the project. But besides the economic benefits, the corridor also makes for a geopolitical asset for Azerbaijan in offering an opportunity to further isolate Armenia with which the country shares adversarial relations. The INSTC undermines Armenia’s own underfunded regional railroad initiative by providing more suitable economic dividends and linking Iran with Turkey via Georgia’s Black Sea Ports while bypassing those of Armenia with the Baku-Tbilisi-Kars route. Notably, for Armenia, the completion of the Armenia-Iran Railway Concession Project would bring colossal direct benefits for its economy by allowing it to avoid the Turkey and Azerbaijan blockade. However, given the paucity of funds, the Armenian project has remained only on paper. Another case in point is the possibility of friction in Russia-Iran relations in the future if a sanctions-free Iran makes headway in becoming an energy hub and gaining larger shares in the oil and gas markets of Europe which has been striving to reduce its dependence on Russian gas. Moreover, realities of the INSTC’s geopolitical geometries may complicate even further if the corridor expands to include countries from the Baltic and Nordic regions along with other interested states like Japan under its ambit. Nevertheless, given that the main argumentation behind the corridor is to reap commercial benefits, it is unlikely for the geopolitical rationale to override economic reasoning.

The INSTC and BRI: A Harmonious Grid?

The INSTC and China’s BRI are both colossal multi-modal undertakings which enhance economic connectivity and promote infrastructural growth. However, conceived almost a decade before the launch of the BRI,  the INSTC is a much older project. Unlike the BRI where China plays the role of the foreman, it follows a much more multilateral approach with multiple stakeholders participating on a level playing field. INSTC proposals are also devoid of ‘debt-trap’ fears which have often plagued the appeal of the BRI. While this makes the INSTC much more transparent and reliable and thereby increases its tenability in the long run, it also implies more constraints in its development process. The shortage of funds for constructing missing links in the corridor is one such example. As the helmsman of the BRI, China is not only willing to invest large sums into the project but is also willing to risk markedly low returns on its long-term investments. This, however, points to the concern that the entire project is a decisive strategic manoeuvre. For India, this holds particularly true for the CPEC stretch on the BRI whose Gwadar port is seen as a catalyst for China to gain a strategic foothold in the Indian Ocean Region. China’s bid to extend ties into Afghanistan and Iran have stirred these tensions further. Nonetheless, it is important to note that Iran’s growing ties with China need not necessarily come at the cost of India-Iran relations. Besides, the North-South axis of the INSTC can, in fact, complement the East-West axis of the BRI to make for a more cohesive transport grid in Eurasia. Although the INSTC and China’s BRI initiative are often pitted against each other, it must be understood that the two are not entirely incompatible with each other.

Bottlenecks and Constraints

Progress on the INSTC has taken place in fits and starts. Following the progress made in the first few years of its inception, development on the corridor slowed down from 2005 to 2012. Progress picked up the pace again after the sixth meeting of the INSTC members in 2012 and the project has been gradually gaining momentum since. Coincidently, this was the same year in which India launched its ‘Connect Central Asia’ initiative. One reason behind the sluggish pace of progress was the imposition of sanctions on Iran which isolated it on the global stage. The other major stumbling block has been the lack of financial backing. None of the three main participants has pockets deep enough to ensure unwavering funds for a project of this scale. Different stakeholders are funding different sub-projects creating structural and technical problems for the corridor owing to its disjointed nature. One such problem is the break of gauge issue. The standard railway gauge used by Iran, a central transit hub, is different from the broad gauge used by Russia and the Central Asian nations. For instance, the Rasht-Astara rail link requires a change of gauge from the standard one as the line crosses from Iran into Azerbaijan. This necessitates the need for more change of gauge facilities. The presence of multiple stakeholders creates other problems like customs control and documentation issues, lack of harmony in transportation laws and improper insurance coverage.[2] Moreover, the project still lacks an information exchange platform. This points to the absence of adequate digitalisation and private sector participation in the INSTC. Although the corridor has garnered interest from some companies like Deutsche Bahn, private sector involvement in the corridor has largely remained dormant owing to their concerns for steady returns on investment and security fears. The corridor passes through regions with critical security risks — be it instability in the conflict-ridden Caucasus, extremism in Afghanistan, domestic discord or forms of transnational organised crime like drug trafficking. This puts the security of cargo transit into question and few companies are willing to gamble with this risk, putting the project’s economic viability in jeopardy.

The Path to the Future

While the North-South Corridor holds immense potential, its full realisation is contingent on the resolution of the bottlenecks and constraints impeding its progress. Addressing these challenges requires closer cooperation with government agencies and private enterprises at both regional and international levels. First, it is imperative to understand that the main selling point of the corridor is commercial gain from increased connectivity. To this end, the INSTC members must avail and make practical and effective use of its complementarity with the existing grid of transnational corridors in Eurasia owing to the North-South axis that the corridor operates on. Synergy with other corridors will allow the INSTC to create additional positive economic spill-overs. Synchronisation with corridors of the Trans-European Transport Network such as the North-Sea Baltic corridor, with organisations like the Black Sea Economic Cooperation (BSEC) and other nations like Japan, Myanmar and Thailand can significantly enhance the outreach of the project. Second, the INSTC members must incorporate new digital technologies, launch a web portal for information exchange and build digital nodes along the corridor to turn it into a fully integrated networking system. One way of achieving this is to have India, with its robust IT sector, take the lead in the digitalisation of the corridor. The other is to push for greater participation from the private sector which is significantly more efficient in advanced technologies.[3] Third, infrastructural and technical issues must be resolved. Integration of logistics assets, provision of visa facilities, ease of gradients, aggregation of cargo bound in the return direction and increasing availability of change of gauge facilities are some steps in this direction. Fourth, it is equally important to work towards greater harmonisation of policies. This necessitates the creation of high-level working groups and adept integration of policies and laws. It is, however, important to ensure that changes introduced in the direction of legal harmonisation must not be integrated with local laws unexpectedly in a trice but rather in a step-by-step manner to ascertain a smooth transition. Only once these steps are undertaken and the existing bottlenecks removed, can the INSTC members expand the ambit of the project to include new domains like smart energy, blockchain technology, pipeline connectivity, and consider the prospects of extending the corridor to areas like North Africa and the Arctic region.

Conclusion

The International North-South Transport Corridor was initiated based on the vision of India, Russia and Iran to enhance strategic partnership and economic cooperation by augmenting connectivity through Central Asia. Although the initial progress was slow, the project has expanded dramatically to potentially increase its reach up to Northern Europe. Extending its geographical stretch to such an extent and tapping into its vast potential, however, is bound to be a time taking process. Questions over sanctions on Iran and Russia, the mustering of adequate economic wherewithal and lack of private participation still linger. Nonetheless, it would be unwise to judge the corridor’s capacity to deliver before it becomes fully operationalised. Given that development on the corridor is still underway, it can be easily modified to overcome structural problems. Cargo exchange and private participation are also bound to drum up further as Asia slowly develops into a larger consumer market itself. While this presents a positive outlook for the corridor’s future, its actualisation rests on the ability of the member states to maintain sustained efforts.


[1] Hriday Ch. Sharma, “Turning the International North-South Corridor into a ‘Digital Corridor’”, Comparative Politics Russia, 4 (2018), 125, 10.24411/2221-3279-2018-10008.

[2] “INSTC Conference-India 2015”, 87-94.

[3] Hriday Sharma, “Turning the International North-South Corridor into a ‘Digital Corridor’”, 124-138

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Pandemic Recovery: White House – Check-In or Check-Out Times

Naseem Javed

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Credit: Diego Rivera

Some 200 nations of the world are in serious economic pains of varying degrees; the images and narratives on social media makes the world appear small and spinning out of control, shrinking mental abilities to Tik-Tok tempo to fit small size screens. In reality, when global dialogues engage some 5000 languages, 2000 cultures, bouncing in 10,000 cities, 11,000 Chamber of Commerce, 100,000 trade associations and some five billion connected alpha dreamers extremely dynamic vibrancy appears. The world is immensely large, as only less than 5% its populace has ever travelled globally while 50% never went outside their own country. On social media, everyone is a certified global expert.

Nevertheless, some 200 nations are trying to change the world toward a better workable plateau, peaceful diversity, tolerance and some sort of balanced trade. The world is hungry seeking out untapped hidden talents of its local citizens, suppressed by the bad local policies. There are continents, oceans, jungles, animals and things, simply, so much, so large, so vast, a mind cannot fathom. Blessed are those who have open minds and souls. The rest self-imprisoned in their own minds, lost in the darkness of their own fears. The borderless world of commerce always needs colorfully smart; open to diversity to bounce in global space with national and global collaborations.  

Such doctrines lost during the last decades as economic disconnectivity blossomed under hologramic economies. Pandemic recovery, today, forces mobilization of the midsize business economy as a bold adventure on quality exportability based on upskilled citizenry. Occupationalism demands small and midsize manufacturing to uplift local grassroots prosperity. In the history of humankind, no other experiment of human endurance has ever been as successful as America; a century old, image supremacy of entrepreneurialism wasted when some 100,000 factories and Middle-Class America disappeared from the heartland. The manufacturing based economy laughed at over ‘information economy’ and hologramic adventuring. Deep study and new global age thinking is a perquisite.

Three types of new challenges

Nations without funding: It is almost a fact most governments from top to bottom are simply broke, and almost a fact most governments have already wasted their funds beyond their means. However, if we focus just on priorities, above programs are primarily not new funding dependent rather they are deployment hungry and execution starved. Any government anywhere in the world in the name of superior efficiencies can easily adopt digitization policy as a survival strategy and make all the processes highly affordable by bringing them on digital formats. The rain of free technologies is flooding the global markets. It is more about upskilling departmental leaderships to adapt to such opportunities, without fear.

Nations without infrastructure: Small percentages of nations have the infrastructure, rest assembling like Lego as they go. The internet connectivity or knowledge plug is almost everywhere. The lack of imagination and upskilling of the gatekeepers is a critical issue.

Nations without digitization: there are a majority of nations where mental attitudes are significant problems, fear of being replaced as redundant or fear of exposing lack of competence preclude any adventure on digitization. No nation will survive on economic progress without national digitization mandates.

Three types of new models: Start with the Marshall Plan thinking, the revolutionary models and national mobilization to catch up the last decade. Start with open debates and honestly frank analysis, no finger pointing. Start with a plastic award night, congratulate failures, and carry on as usual until the next pandemic.

When history becomes nothing, but agreed upon lies, culture as agreed upon fables, truth becomes taboo, dumb down narrative dominates, restless citizenry emerges.

Summary: Within next 50 days, the US Election will make global shock waves, no matter who wins…it will be the battles on acceptance and concession speech, the mail-order selection criteria my linger weeks or months in chaos… the Vaccines races may collide with bad results and delay the process to 2022. The economic recovery shaped W may bring reopening normalcy possibly in 2022. Tough and difficult times demanding critical thinking and mental endurance on all fronts. Study how national mobilization of mid size economy works in digital age.

Plan wisely and select right paths; but open bold and honest discussions, as masked and sealed lips are where most of the problems originally germinated. Move or get moved. 

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How India can get its growth back on track after the coronavirus pandemic

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The Covid-19 pandemic has led to exceptionally challenging times. World Bank projections suggest that the global economy will contract by 5.2% in the current year. India, too, is likely to be significantly impacted.

Covid-19 afflicted India when the economy was already decelerating. After growing at an average of 7% a year in the previous decade, growth decelerated to 6% in 2018-19, and fell further to 4.2% in 2019-20. Pre-Covid-19 slowdown was due to a number of factors: longstanding structural rigidities in key input markets, stressed balance sheets compounded by greater risk aversion among banks and corporates, and, more recently, growing vulnerabilities in thThe pandemic has rendered the outlook even more sombre. So is India’s growth story over?The pandemic has rendered the outlook even more sombre. So is India’s growth story over?

Two years ago, we analysed the long-term trends in India’s growth rates. Studying 50 years of data, we found that despite variations in the trend rate, growth accelerated steadily, with no prolonged reversals. Economic growth also became stable — both due to growth rates stabilising within each sector, and due to the economy’s transition toward the steadier services sector. Importantly, faster and more stable growth was evident across states without being concentrated, for the most part, in a few sectors or activities. Furthermore, periods of faster growth saw productivity gains and not just an increase in factor inputs. All these point to the long term resilience of India’s economy.

Several factors were instrumental in India’s growth story. First, India benefited from a growing working-age population. Second, its savings and investment rates continued to increase until the late 2000s. Third, the financial sector grew significantly, with a rising ratio of bank credit to GDP. Fourth, India was likely aided by its strong institutional base. Fifth, India’s trade-to-GDP ratio grew rapidly from the early 1990s, until world trade stalled due to the global financial crisis.

Finally, the macroeconomic policies, notably monetary and fiscal, were formulated under credible frameworks in the last decades, yielding impressive macroeconomic stability.

General State of Weakness

However, some of these factors have weakened in recent years. After the 2008-09 global financial crisis, specific weaknesses emerged in private investment, export performance and the banking sector. These have persisted for nearly a decade since. Investment rates and exports declined as a percentage of GDP. Worryingly, the vulnerability of the financial sector increased, resulting in anaemic credit growth.

Covid-19 has magnified these weaknesses. Disruption in economic activity has dented consumption, investment and exports. RBI’s financial stability report has cautioned that the financial sector is likely to bear a significant burden from the slowdown. What, then, is the short- and medium-term prognosis for India’s economy? How may the policy response be tailored?

As a response to Covid-19, extensive measures have been taken in the regulatory, fiscal and monetary policy areas. But there are limits to these relief and support measures, both in terms of their effectiveness and affordability. Recovery now will depend in equal measure upon unlocking the supply side, and on the containment of the virus itself.

Private investment in India is likely constrained by several factors, including financial sector inefficiencies, deleveraging, crowding out and regulatory policy framework. Removing these, and sector-specific constraints, and ensuring policy certainty will be important. While India has received healthy volumes of FDI, encouraging these further can spur both domestic investment and greater integration in global value chains (GVCs).

Exports were an important driver of growth prior to the global financial crisis. But its contribution has diminished since. The ratio of exports to GDP has been declining, with India’s share in global exports remaining stagnant, or even decreasing. India can improve its competitiveness in the world economy by boosting investment in infrastructure and bringing it at par with other global manufacturing hubs; further reforming land, labour and financial markets; upgrading the education system to equip its workforce with skills. Besides, a competitive exchange rate, deeper trade integration, and greater embedding into GVCs will assume significance.

In the financial sphere, Indian banks have seen subdued credit growth, and asset quality remains stressed. In the past few years, a number of measures have been announced — including the consolidation of banks, an asset quality review, timely resolution for specific institutions, strengthened oversight or forbearance (post-Covid-19) and equity infusions. These measures have improved the oversight of India’s financial sector and boosted financial inclusion. However, more needs to be done to improve the safety, depth and efficiency of financial intermediation.

Additional priorities include maintaining financial sector stability, undertaking specific reforms in the non-banking financial sector, deepening capital markets, enhancing the role of fintech and ensuring a more selective and strategic footprint for the public sector in the financial sphere.

Growth Rides on Reforms

There is nothing, however, that seems permanently broken in India’s growth model to warrant pessimism. Many of the deep-rooted structural factors that helped fuel the economy’s sustained growth during the past decades seem intact: demography, a large and diversified economy, still low-income levels that signify the potential to grow, a dynamic entrepreneurial class, political and geopolitical stability, a strong institutional base and credible policy frameworks.

With continued policy attention on reforms — which spur private investment, increase the economy’s competitiveness, promote greater integration into the global economy, and ensure an efficient financial sector — India can revert to the growth path of the past.

 Source: World Bank, The Economic Times

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