India should embrace a path towards modern economy to reverse its slow growth and restore the economic miracle the country has achieved, a prominent US think-tank has said.
The Information Technology and Innovation Foundation (ITIF) said that India should aim to spur across-the-board productivity growth in all sectors based on competitive markets, liberalised trade and robust innovation policies to reverse its slow growth, spur global competitiveness, and restore the Indian economic miracle.
The US-based think-tank on IT in its major report "The Indian Economy at a Crossroads" said this strategy will create strong innovation-based industries at home that can effectively compete globally, while providing a much more effective strategy to achieve the broad and sustainable income and employment growth India seeks.
Running into more than 130 pages, the report said that India's economic success this past decade is increasingly threatened by innovation mercantilist policies — like Preferential Market Access (PMA) rules for government procurement of ICT products and compulsory licensing of bio pharmaceutical intellectual property — designed to promote selected domestic industries, even at the expense of other Indian industries and Indian consumers.
"But while such policies may seem beneficial in the short-term, they will ultimately prove counterproductive, by hampering domestic productivity, lessening India's attractiveness to foreign direct investment (FDI), and potentially leading to retaliatory measures by other nations that would imperil the global trading system," the report said.
ITIF comes up with a series of recommendations in its report designed to create a comprehensive, pro-productivity strategy that can strengthen Indian innovation and spur the development of new industries and high-tech sectors that can generate sustainable growth.
This includes improving the process of Indian inter-agency communication and coordination in the development and promulgation of administrative and agency rule-making.
ITIF urges the Indian Government to bring increased clarity and certainty to India's regulatory environment across national, state, and regional levels and appoint a National Productivity Commission based on Australian model.
Urging India to join international negotiations seeking to expand product coverage of the Information Technology Agreement (ITA), it calls for repealing Preferential Market Access (PMA) rules.
"Complete a US-India Bilateral Trade and Investment Agreement to promote foreign direct investment in India," ITIF ecommends.
While the recent global economic downturn has played a part, a major factor in India's economic slowdown has been the loss of momentum for continued economic and trade liberalising reforms it said.