Due to the closed nature of the Indian economy until the 1980s India continues
to be a small player in the arena of international trade and investment flows,
But with the recent opening up of the economy and rapid growth in the export
of goods and services, India is definitely gaining strength. The tremendous
surge in the export of services since 2001 is drawing international attention,
inducing many IT-based global services to move to India. Also, private capital
flows – including foreign direct investment – which were initially
very limited, are now showing dynamism.

During the 1970s, the debate in India centered on how to improve upon the historical
3 percent annual growth rate of the economy. Few would have predicted that this
“sleeping giant” would wake up to attain – and sustain –
an average growth rate of about 6 percent per annum for over 25 years. In fact,
with 7.9 percent growth during 2002–05, there is increasing optimism about
the economy achieving further growth. This situation has fueled a very lively
debate in India, primarily on two aspects. The first concerns the factors underlying
India’s long-term growth and the other relates to the sustainability of
this growth.

Sadiq Ahmed reviews the debate in the context of India’s long-term growth
experience, opportunities, and challenges and examines the factors that helped
to achieve rapid economic growth during the past 25 years. He draws on his findings
to analyze the main constraints that are likely to affect the country’s
growth in the future and highlight the policies that are needed to ease them.