India's Lessons for South Africa

India’s move from a dysfunctional economy to one of Asia’s economic success stories bears lessons for South Africa, swimming in recession propelled by economic meltdown.

While South Africa’s prospects look bleak, India is looking at further improving its situation using a base that was laid in the early 1990s .

According former deputy chair of India’s National Planning Commission, Montek Singh-Ahluwalia, India implemented real economic reforms to pulled itself off its policy dysfunctionality quagmire and landed on a new growth pedestal.

India had severe balance of payment crisis in 1990. But the government of the Prime Minister and then-Finance Minister Dr Manmohan Singh began to implement a number of systemic changes in 1991.

By the 2000s, India recorded 7% annual growth in GDP.

“This meant a huge increase in growth of per capita income – it increased from growing at 1% to 5.5% per year. That made a big difference to poverty, inequality, and structural change,” Singh-Ahluwalia said.

The growth averaged at between 6% and 7% at the start of the 21st century. This made it the world’s fastest growing economy between 2014 and 2018, overtaking China.

This emerged during a sitdown conversation between Singh-Ahluwalia and Ann Bernstein, executive director of the Johannesburg-based Centre for Development Enterprise.

Ahluwalia said it was a mistake to assume that if high growth was achieved, it would automatically lead to prosperity for all.

“When we aim at, say, 8% growth for the economy as a whole, it does not mean that every person will have 8% growth in their income.”

He said India consistently took the view that, at India’s level of per-capita income, redistribution independent of growth doesn’t make any sense at all.

“We had to have a policy that promotes growth, and the reforms aimed at raising the rate of growth to between 7% and 8%. However, we did not assume that high growth would automatically ensure a wide spread of benefits.”

The country adopted a number of policies that were aimed at making growth more inclusive, one of which related to the sectoral composition of growth.

That made a big difference to poverty, inequality, and structural change

Montek Singh-Ahluwalia Former deputy chair of India’s National Planning Commission

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