March 2010
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India's Future Agenda

The 2009 victory of the United Progressive Alliance (UPA) was the first time since 1962 that an Indian prime minister was elected to a second five-year term.

How will this renewed political mandate reshape the country's agenda in key areas of public finance, trade, investment, infrastructure and rural development?

Key Points
• To achieve its goal of returning to 9% growth in a climate of weak international demand,    India will rely on investment in infrastructure and human capital
• Manufacturing jobs must be created to employ the large numbers of young workers and   ensure social inclusion
• It is time for a new, more sustainable Green Revolution
• Progress must continue on the reform agenda, including at the state level • India will   continue to play a greater role on the world stage, in part through its Look East policy

Synopsis

India has successfully withstood the economic crisis, boasting an average annual growth rate of 7%. Officials aim to return to the pre-crisis average of 9%. Given weak demand globally, they plan to make up the difference not with exports but by investing in infrastructure and promoting inclusiveness through spending in areas like health, education and rural development. Energy will be an integral part of the infrastructure development mix. This will include an emphasis on low-carbon and clean alternatives.


India needs to make the same kind of progress in manufacturing and agriculture that it has in services, notably in information technology. Indian officials are determined to transform the country into one of the world’s most important manufacturing hubs. Some 100 million jobs must be created to meet the employment needs of new workers who will be entering the job market and to meet the goals of social inclusion set by the government. Education and worker training programmes will be needed to address the projected 40% shortfall of skilled manpower by 2025.

A new Green Revolution is needed to boost India’s agricultural production in a sustainable way. This shift is dictated in part by a desire to reduce the sector’s carbon footprint. Dating to the 1960s, the first Green Revolution boosted output considerably – in part, by using pesticides and irrigation. The challenge now is to continue to improve harvests while weaning the system away from the unsustainable application of chemicals and excessive water and energy use. At the same time, agricultural subsidies, which drain public coffers and distort markets, must be reduced. One problem is that many aspects of agricultural policy are determined at the state level.

In addition to agriculture, the reform agenda includes overhauls of the financial and banking industries, the educational system and labour legislation. So far, reforms have only advanced at the national level, even though states are very powerful. For example, local regulations block the exchange of goods across state lines despite the fact that free interstate commerce is written into the national constitution. There was disagreement about whether support for reforms is waning in Parliament or not.

As evidenced by its role at the COP15 climate change talks in Copenhagen in December, India will become an increasingly important player in global affairs. One area of uncertainty is how the world will take to the emergence of two large developing economies – India and China – on the international stage at the same time. For its part, India is likely to maintain its strong ties to the United States while pursuing its Look East policy to engage the countries of the Association of Southeast Asian Nations (ASEAN) and other Asian countries.



 
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