India, the Washington Consensus and the East Asian Crisis

Abstract

The stability and continued growth of the Indian economy in the midst of the East Asian crisis does not suggest an alternative economic model. India, in a cautious approach to market reforms, especially on capital controls, did protect its economy from the East Asian contagion. But the presence of capital controls was more a result of chance than of choice, and in spite of the regional crisis, the average standard of living in India remains far below that in East Asia. The larger caution in the Indian reform process has been the result of compulsion rather than choice. Political and public opposition within a few years of the introduction of market reforms in the early 1990s, has forced successive governments to go slow on liberalisation. This resistance has developed alongside the emergence of a more fractious and assertive democraticprocess. Unless there is a broad political consensus on economic issues, there is little likelihood of policy decisions that will facilitate an economic transformation that will make an impact on India's huge poverty. Moreover,while the overall pace of economic growth since the introduction of reforms in the early 1990s has been substantial, it has taken place in fits and starts.