Are these projections a mere pipedream — or are these realisable? The authors of the report emphasise that these projections are achievable "if things go right". They also point out that there is no guarantee that things will indeed go right. So, it is useful to understand what needs to go right for the projections to become reality. For India and the rest of the BRICs to reach the realisable goals of prosperity by 2050, the following ingredients of growth must be present:

Sound macroeconomic management is key to economic growth and progress. Severe internal or external crises can set back the development clock by up to a decade going by past experience. There have been catastrophic examples of such crises in Indonesia and Latin America. In fact, among the BRICs, Brazil is expected to lose a decade and resume its growth trajectory only from 2012. India could also lose up to a decade if macroeconomic mismanagement continues on a massive scale. So, it is imperative that the Centre contains its fiscal deficit by limiting the fiscal profligacy at the Centre and the States. One can go to the extent of recommending enactment of legislation that precludes self-serving actions of politicians that result in excess fiscal profligacy.

To implement this effectively, an index of fiscal profligacy must be developed. Containing fiscal profligacy is likely to result in a conducive economic environment with low inflation. The consequent reduction in the cost of capital is likely to spur a growth, which should cascade into an avalanche of prosperity for all Indians.

India cannot attain the goals laid out in the Goldman Sachs report without achieving significant breakthroughs in all facets of governance. Good governance is a precondition for accomplishing higher levels of economic efficiency. Superior governance is essential to "oil the wheels of economic engine of prosperity". We need radical improvements in governance to pervade the legal system, the markets, health-care delivery systems, educational institutions, and governmental bureaucracy.

In the past 40 years, countries such as Argentina, Brazil and India underperformed in economic performance compared to their respective potential on account of poor governance. A conducive policy environment could have catapulted these economies into a trajectory of high growth.

All is not lost. Broad ranging governance reforms can provide a facilitating institutional framework to promote growth. The authors of the BRICs report have correctly assumed lower rates of convergence in growth rates for Brazil and India compared to China, given the significant impediments to institutional reform prevailing in these countries. It is imperative to create a governance index to measure the periodic progress. A suitable index could be constituted to quantify the progress in governance of India as a whole and its constituent states.

Governance failure is the single biggest impediment to achieving a higher growth rate of the Indian economy. Concrete steps need to be undertaken to stem the rot in Indian governance. An interesting indicator of the severity of governance failure is the increasing occurrence of "governance by judiciary". Lacking any other means for obtaining redress of governance failures, public-spirited individuals have taken recourse to judiciary. This development is good in parts. While the aggrieved are able to receive speedy redress for problems caused by governance failure, the unintended consequence is that it strains the already overburdened judiciary. What is the alternative?

To impart impartiality and credibility, and as a permanent solution to eliminate governance failures, a "Governance Commission" endowed with judicial powers must be constituted. To be effective, this body should not only be capable of handling administrative failures at the micro level; it must also facilitate major administrative reforms to handle systemic failures.

Liberalisation of all types of markets and investments in human capital on a much larger scale are the major prerequisites for supporting India's economic growth to the fullest potential.

(The author is Associate Professor, Division of Banking and Finance, Nanyang Business School, Nanyang Technological University, Singapore.)

Article E-Mail :: Comment :: Syndication