by Noah SmithIndia has more than a sixth of the world’s population. It’s also still a poor country. So what happens there is incredibly important for the welfare of the human race.
For a long time, good things were happening in India. Cautious pro-business reforms in 1980s were followed by the dismantling of much of the country’s overbearing regulatory state in the 1990s and 2000s. At the end of a long boom, India was five times richer per capita than in 1980.
Although the gains tended to go to a small slice of the population, India managed to make great strides against extreme poverty; it’s no longer the country with the largest number of very poor people (that dubious distinction now goes to Nigeria). Development has meant food, shelter and sanitation for hundreds of millions of Indians.
But this good news is now old news. The country has entered a major economic slowdown.
BloombergA Sharp Slowdown
The growth number probably understates the magnitude of the slump. Industrial production has actually shrunk in recent months, as has the production of capital goods. Electricity generation has also slowed by more than gross domestic product growth.
A series of interest-rate cuts has failed to stop the decline. India already has real interest rates of negative 2.2%, lower than other developing Asian countries, suggesting that monetary policy isn’t going to be the answer. The government of Prime Minister Narendra Modi has also been