India's economic polices: need to start afresh

Two intriguing concepts came to my notice in the context of discussions on the US economy. The first was part of a conversation held with a senior diplomat in Washington, DC who has served in India, and who was wanting to understand the state of the Indian economy. His main concern was related to India?s ability ? or the lack of it ? to attract adequate inflows of capital from other countries as a means to accelerate economic development. His thesis was that the US had established a record of ?growing on other people?s money?, and that India had all the elements of governance and institutional capabilities to be able to do the same. His approach made sense, because other than countries of the former Soviet Union, every country that has prospered since the beginning of the industrial revolution has done so through the net inflow of capital. And what happened to the Soviet Union has brought out the failings of excessive self-reliance. The second set of observations that compel some comment come from the pen of Robert J Samuelson writing in the latest issue of Newsweek in an article titled ?The Economics of the Rat Race?. Samuelson states that throughout American history, opportunity and insecurity have come in the same package. This is a function of the boom-and-bust path taken by the US economy, which has obvious implications for human behaviour, and which sociologists have much to say about. A saga of rags to riches and rags again has lessons for what the aim of economic policy should be, now that pure socialism has clearly failed its followers and unbridled capitalism has a growing band of opponents too who make their presence felt from Seattle to Genoa. Indian economists have to get into a serious huddle (to use an American football expression) and start a serious debate on what we should do with our own economic policies, even as growth is slowing and expectations and intolerance of sluggish development are rising. A fresh start is essential and urgent if India is to matter in the world and social forces are to be harnessed for the common good at home.