News Release

November 7, 2005

Media Contact: (202) 789-5200

Market Reforms Key to India's High Growth
Critics of globalization and Indian openness have it wrong

WASHINGTON - India has shown impressive economic growth since market reforms in 1991. In order to sustain such growth, or to achieve similar results in other developing countries, policymakers must understand the reason for India's success.

In a new study released by the Cato Institute, "The Triumph of India's Market Reforms: The Record of the 1980s and 1990s," Arvind Panagariya, professor of Indian political economy and professor of economics at Columbia University, argues that India's economic boom is a consequence of market liberalization.

Panagariya details the decade following the 1991 reforms, in which India's gross domestic product rose at nearly twice the average annual rate of the first thirty years of the country's economic development. Yet critics maintain that high growth began in the 1980s, and that far-reaching liberalization had little to do with India's progress.

Panagariya acknowledges that India experienced several years of strong, but erratic economic growth before 1991. However, he attributes this pre-reform period of growth to half-hearted attempts at liberalization and excessive fiscal spending, the latter of which resulted in an economic crisis in the early 1990s.

The 1991 market reforms were systematic and widespread and caused higher growth than in the 1980s, Panagariya concludes. To sustain high growth, and to enable India to catch up to China's high level of economic performance, Panagariya suggests additional liberal reforms like reducing tariffs to stimulate industry and privatizing enterprises.

Policy Analysis 554: http://www.cato.org/pub_display.php?pub_id=5155

Contact:

Arvind Panagariya, professor of Indian political economy and of economics, Columbia University, ap2231@columbia.edu

Ian Vasquez, director, Project on Global Economic Liberty, 202-789-5241, ivasquez@cato.org

Kristen Kestner, media manager, 202-789-5212, kkestner@cato.org

Evans Pierre, director of broadcasting, 202-789-5204, epierre@cato.org