Indian Prime Minister Manmohan Singh arrives in Washington in a few weeks to reiterate his country's strong ties with the United States and its status as an emerging power that can rival China's economic juggernaut. Relations between the US and India have never been better, and India's Congress-led government deserves credit for continuing the close relationship put in place by the previous administration.
It gets an A grade for defusing tensions with Pakistan and creating an opportunity to talk about mutual differences. But, on the economic front, the A grade turns into a C.
One year after unexpectedly taking the oath of office, there is no sign that Dr Singh can overcome the opposition of his socialist allies and produce the changes that will put India in the fast lane towards economic reforms. Barring the introduction of India's first value-added tax, there is not a single big case which the government can use to boast of its commitment to reforms and achieving the double-digit growth required to produce jobs, improve the infrastructure and lift millions of Indians out of poverty.
India has made moderate increases in foreign investment caps in a number of sectors in the past year, but these are too small for a country that wants to match China's economic success.
In a recent analysis, the financial services group UBS Securities Asia argued that India's economic future may not be as rosy as editorials and commentaries would like us to believe. It points out that China's cumulative growth between 2000 and the present is nearly double that of India's. There is no doubt that India has achieved impressive sustained growth rates since 1991. But the question is whether it can sustain a growth rate of 8 to 9 per cent or higher to catch up with its Asian competitors and improve its dismal human-development indicators.
To do so, it will have to undertake a couple of structural reforms, which carry enormous political risks. These include reining in the runaway fiscal deficit, freeing its manufacturing sector from antiquated labour laws, selling state-owned assets and using the freed-up cash for investments in physical infrastructure.
