Ideas of India Taking Stock of the Indian Economy with Prachi Mishra
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Apr 24, 2025 Prachi Mishra is a Professor of Economics and Director at the Isaac Center for Public Policy at Ashoka University, previously serving at the IMF. She discusses the current state of the Indian economy, focusing on growth trajectories and the potential overvaluation of the rupee. The conversation delves into trade policies, the stagnant manufacturing sector, and the vital role of services in addressing trade deficits. Prachi emphasizes the need for structural changes to align economic growth with India's development goals for 2047.
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Understanding India's Cyclical Slowdown
- India's recent GDP slowdown is mainly cyclical, reflecting policy tightening after post-COVID stimulus.
- Monetary easing has begun to address negative output gaps and deficient demand, especially in consumption.
Widening State Growth Divergence
- India's state-level growth diverges vastly, with richer states growing faster than poorer ones.
- Bihar exemplifies this divergence, lagging far behind, resembling low-income Sub-Saharan African regions in per capita income.
Boosting Labor-Intensive Manufacturing
- To boost labor-intensive manufacturing, expedite FTAs, reform labor laws, improve raw material supply, and scale-up SEZ infrastructure.
- Prioritize positioning India in global supply chains, capitalizing on shifts as China moves up the value chain.