NEW DELHI – Indian cricket fans are manic-depressive in their treatment of their favorite teams. They elevate players to god-like status when their team performs well, ignoring obvious weaknesses; but when it loses, as any team must, the fall is equally steep and every weakness is dissected. In fact, the team is never as good as fans make it out to be when it wins, nor as bad as it is made out to be when it loses. Its weaknesses existed in victory, too, but were overlooked.
Such bipolar behavior seems to apply to assessments of India’s economy as well, with foreign analysts joining Indians in swings between over-exuberance and self-flagellation. A few years ago, India could do no wrong. Commentators talked of “Chindia,” elevating India’s performance to that of its northern neighbor. Today, India can do no right.
India does have serious problems. Annual GDP growth slowed significantly in the last quarter, to 4.4%, consumer price inflation is high, and the current-account and budget deficits last year were too large. Every commentator today highlights India’s poor infrastructure, excessive regulation, small manufacturing sector, and a workforce that lacks adequate education and skills.
These are indeed deficiencies, and they must be addressed if India is to grow strongly and stably. But the same deficiencies existed when India was growing rapidly. To appreciate what needs to be done in the short run, we must understand what dampened the Indian success story.