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1 1 (September 2018)

handle is hein.amenin/aeiaakj0001 and id is 1 raw text is: Key Points * Disputes between Prime Minister Narendra Modi's government and the opposition obscure the crucial fact that India has pursued the same unwise economic policies re- gardless of who has been in office. The result is decent economic performance while the possibility of a true breakthrough slips away. * India has consistently emphasized GDP growth while not even measuring employment properly, much less pursuing maximum employment through a liberalized labor market. It is therefore impossible for the country to make full use of its huge labor force. * Most rural land is collectively owned. The result, according to both history and basic eco- nomics, is that hundreds of millions of rural citizens remain poor, unproductive, and isolated from modernization. * Large sums of money are wasted despite claims of progress that should offer opportunities for high-return investment. This is seen in long-term borrowing by central and local govern- ments and the creation over time of nonperforming assets in public-sector banks. With the US federal government borrowing heavily for no good reason, the world economy needs other countries to become durable engines of growth. At the top of this list is India, which has the potential to transform economically over the next generation. But India will probably fall well short of this poten- tial because it continues to make the same economic errors it has made for at least a decade. The current government led by Prime Minister Narendra Modi is at fault, but so was the previous government led by the now-opposition Congress. The Congress and Modi's Bharatiya Janata Party (BJP) purport to clash sharply on the economy but offer only minor variations on multiple harmful themes, including: * Borderline obsession with gross domestic prod- uct (GDP), which distorts policy priorities; * Effective disregard of employment as the most vital objective, so that India is not in a position to take proper advantage of its huge young labor force; * Unwillingness to create a true market for rural land, which has been indispensable in the de- velopment of every rich nation; and * Public-sector borrowing, to include loans by state-owned banks, with no sound economic rationale, which wastes huge sums. In comparison to these fundamental long-term mis- takes, comparatively short-term economic policies such as demonetization mean little. While the Modi government has strived to improve the business envi- ronment, its failures to act on labor, land, and state profligacy make it more similar than different to its predecessors. India remains on an unnecessarily slow economic development path, with little prospect of a true breakout. AMERICAN ENTERPRISE INSTITUTE

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