{
  "title": "Letting the Future In: India's Continuing Reform Agenda, Address by Anne O. Krueger, Acting Managing Director, IMF",
  "publication": "IMF News, June 4, 2004",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp060404",
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  "summary": "Keynote Speech to Stanford India Conference",
  "publishDate": "2004-06-04",
  "sections": [
    {
      "heading": "Overview and central message",
      "content": "- The 1991 reform program set India on a sustainable growth path through trade, financial and economy-wide liberalization.\n- Official growth target of 7-8 percent is \"attainable\" and \"more can be achieved\"; with appropriate commitment, \"growth of 10 percent a year is both necessary and feasible.\"\n- The IMF's role is to support governments in delivering sustained and rapid growth to raise living standards and reduce poverty; the Fund does not dictate policy priorities."
    },
    {
      "heading": "Achievements to date and empirical findings",
      "content": "- Growth acceleration began in the 1980s due to: removal of some controls on private sector activity; relaxation of quantitative restrictions on imports; and expansionary fiscal policy.\n- The 1991 balance of payments crisis led to radical reforms that restored stability and sustainability.\n- Post-1991 performance:\n  - India averaged around six percent a year over the period since 1991.\n  - National poverty rate estimate: dropped from just under 41 percent of the population in 1992-93 to less than 29 percent at the turn of the century.\n  - Rural poverty: \"a tad over 30 percent in 2000.\"\n  - Urban poverty: 24.7 percent.\n- Recent growth exceeded 7 percent (\"growth in excess of 7 percent achieved last year\").\n- Sectoral successes: software industry growth, outsourced services (call-centers), rise in middle-class consumption."
    },
    {
      "heading": "International comparison: Korea as an example",
      "content": "- Korea reforms and outcomes:\n  - In 1960, exports equaled 3 percent of GDP, nearly 90 percent primary commodities.\n  - By 1964, exports rose from $30 million in 1960 to more than $100 million.\n  - Imports rose from 13 percent to around 40 percent of GDP; exports from 3 percent to 37 percent of GDP during reform progression.\n  - In the first decade after 1963, real GDP growth averaged 13 percent a year.\n  - By 1988, exports were 46 percent of GDP.\n  - Between 1962 and 1992, per capita income rose almost sevenfold.\n- Lesson: opening the economy and export-led policies, plus infrastructure investment, supported sustained growth and relatively equal income distribution."
    },
    {
      "heading": "Major reform priorities and policy recommendations",
      "content": "- Fiscal policy and deficit:\n  - The large deficit is \"now in excess of 10 percent of GDP\" and \"simply not sustainable.\"\n  - Support for Fiscal Responsibility and Budget Management Act; concern over proposed delay to budget balance target date to 2009.\n  - Fiscal reform emphasis: make public sector more efficient; improve revenue collection and tax administration; widen tax base; streamline civil service; better-targeted transfer payments; reduce subsidies that benefit the middle class.\n  - Reducing government's reliance on borrowing will free up resources for the private sector and help raise productive investment.\n  - Empirical examples: Turkey ran a primary surplus of more than 6 percent while achieving almost 6 percent growth; Brazil had a primary surplus of 4.5 percent with growth picking up.\n\n- Infrastructure:\n  - Rapid improvements in transport, power and communications are \"vital\" for private sector productivity and poverty reduction.\n  - Government should focus on core responsibilities and leverage private sector where appropriate.\n\n- Social provision and service delivery:\n  - Better targeting of education and health can increase benefits for the poor at the same or lower cost.\n  - Public sector efficiency is critical to improving delivery of education, health and infrastructure.\n\n- Center-state relations:\n  - Many delivery and infrastructure problems lie with states; resolving center-state issues and giving states the right incentives is key.\n  - States can learn from one another to address regional disparities.\n\n- Labor market reform:\n  - Around 40 million people are already looking for a job in India, and another 35 million are likely to join them within three years.\n  - Labor regulation prevents large-scale private-sector job creation; deregulation would enable labor-intensive manufacturing to create unskilled jobs.\n  - High-tech and services sectors are successful in part because they are exempt from restrictive labor regulations; similar freedoms across the economy would expand job creation.\n\n- Foreign direct investment (FDI):\n  - FDI in India is \"still less than three quarters of one per cent of GDP.\"\n  - Comparative figures: more than 3 percent in Brazil, and more than 4 percent in China.\n  - India accounts for \"less than one half of one per cent of global foreign investment.\"\n  - Recommendation: reduce regulation and red tape to attract more foreign investors."
    },
    {
      "heading": "Implementation challenges and micro-level bottlenecks",
      "content": "- Bureaucratic hurdles and lack of local incentives impede exporters; streamlining procedures at local levels could yield significant gains.\n- Public sector shortcomings are not always due to funding shortages: corruption and mismanagement matter.\n  - Education sector absenteeism findings: across India 25 percent of teachers are absent on any given day; in Bihar 38 percent and in Jharkhand 42 percent. Absence in private schools is nearly as bad—\"around two percentage points less than in public schools.\"\n- Center-state coordination, local implementation incentives, and reduction of corruption/mismanagement are essential to translate reforms into better services and infrastructure."
    },
    {
      "heading": "Scenarios and potential outcomes",
      "content": "- With sustained and bolder reform momentum post-election:\n  - India could move to a path of sustained and rapid growth, enabling much greater poverty reduction and faster rises in living standards.\n  - Growth, combined with improved public service delivery and labor market liberalization, would generate more and better jobs.\n- Without fiscal consolidation and structural reforms:\n  - The unsustainable large deficit could constrain long-term growth prospects and crowd out private investment."
    },
    {
      "heading": "Conclusion",
      "content": "- India has achieved significant reform-driven gains since 1991; these gains can be expanded by pursuing:\n  - Fiscal consolidation combined with public-sector efficiency,\n  - Rapid infrastructure modernization,\n  - Improved center-state cooperation,\n  - Labor market deregulation to enable large-scale job creation,\n  - Greater encouragement of foreign investment.\n- \"Bigger steps, taken more boldly, would bring correspondingly greater rewards.\"\n\nSource: Letting the Future In: India's Continuing Reform Agenda, Address by Anne O. Krueger, Acting Managing Director, International Monetary Fund, June 4, 2004.\n\n---\n\n\n References\n\n- India and the IMF\n- Republic of Korea and the IMF\n- United States and the IMF\n- Speeches\n- Anne O. Krueger\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp060404"
    }
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    "Published: June 4, 2004",
    "The 1991 reform program set India on a sustainable growth path through trade, financial and economy-wide liberalization.",
    "Official growth target of 7-8 percent is \"attainable\" and \"more can be achieved\"; with appropriate commitment, \"growth of 10 percent a year is both necessary and feasible.\"",
    "The IMF's role is to support governments in delivering sustained and rapid growth to raise living standards and reduce poverty; the Fund does not dictate policy priorities.",
    "Growth acceleration began in the 1980s due to: removal of some controls on private sector activity; relaxation of quantitative restrictions on imports; and expansionary fiscal policy.",
    "The 1991 balance of payments crisis led to radical reforms that restored stability and sustainability.",
    "Post-1991 performance:",
    "Recent growth exceeded 7 percent (\"growth in excess of 7 percent achieved last year\").",
    "Sectoral successes: software industry growth, outsourced services (call-centers), rise in middle-class consumption.",
    "Korea reforms and outcomes:",
    "Lesson: opening the economy and export-led policies, plus infrastructure investment, supported sustained growth and relatively equal income distribution.",
    "Fiscal policy and deficit:",
    "Infrastructure:",
    "Social provision and service delivery:",
    "Center-state relations:",
    "Labor market reform:",
    "Foreign direct investment (FDI):",
    "Bureaucratic hurdles and lack of local incentives impede exporters; streamlining procedures at local levels could yield significant gains.",
    "Public sector shortcomings are not always due to funding shortages: corruption and mismanagement matter.",
    "Center-state coordination, local implementation incentives, and reduction of corruption/mismanagement are essential to translate reforms into better services and infrastructure.",
    "With sustained and bolder reform momentum post-election:",
    "Without fiscal consolidation and structural reforms:",
    "India has achieved significant reform-driven gains since 1991; these gains can be expanded by pursuing:",
    "\"Bigger steps, taken more boldly, would bring correspondingly greater rewards.\"",
    "[India and the IMF](http://www.imf.org/external/country/IND/index.htm)",
    "[Republic of Korea and the IMF](http://www.imf.org/external/country/KOR/index.htm)",
    "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[Anne O. Krueger](https://www.imf.org/external/np/omd/bios/ak.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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