Ingenuity keeps India on track

Much of India's economic success is a result of the country increasingly embracing the free market and releasing the entrepreneurial drive and skills of its people and institutions.

Despite the global economic slowdown and the threat posed by a high fiscal deficit and rising inflationary pressure, Indian Prime Minister Manmohan Singh has predicted that the country's economy will grow by seven per cent in the coming year. Furthermore, India has underlined its growing importance in the international economy with its surprise purchase of $6.7 billion (Dh24.6 billion) worth of gold to diversify its foreign reserves from US assets. This is a prudent move given the still bleak outlook for the US economy and currency, however it came as a shock to the international financial system. The hundreds of billions of dollars that the US is using to keep its economy afloat is being loaned from emerging economies, among others. If India is leading the move away from US assets, the global financial system faces another major shake-up.

At the World Economic Forum meeting on India, Singh reaffirmed his commitment to reforming the financial system and reducing his government's support for the economy. India has put an economic stimulus programme in place to help it ride out the global economic slowdown.

Reducing the still high levels of government involvement in the economy is necessary as the free market is the best way to generate and distribute wealth. However, Singh needs to back his words with action. India has dragged its feet on the reform of its financial system, testing the confidence and patience of investors, and depriving its business community and many of its people of the fast and efficient banking services needed in a modern economy.

India is a country with immense social and economic challenges, including significant disparities in wealth and income between communities and gender. However, with the clever use of its increasing resources and the effective implementation of the right policies, it will remain on track to become one of the new economic powers.