Manmohan vs Modi

Essentially Modi is a Supply side thinker. Manmohan a demand side thinker. 10 years of trying to stimulate only the demand through cash and capital infusion has resulted in a grinding slow pace of economic growth largely due to supply side constraints. Removing these supply side constraints is what Modi (and BJP) is all about. Indeed Governance in India today is all about ensuring supply side efficiency and capacity. Demand generation is automatically fueled by the large young and aspiring population.

The present regime has chosen the easy way out. Modi et. al. are willing to do the hard work. So sure was the present government that the aspiring millions would automatically result in the continued high economic growth that they almost completely disregarded the need to create the capacity in the system to carry higher growth.

Surprising that no one has articulated this. Modi baiters are too blinded by their dislike for him to acknowledge this. In fact they attempt to obfuscate the distinction by saying that the BJP and Congress have the same economic policies.

Raghuram Rajam talks about it briefly in his article on Why India Slowed http://www.livemint.com/Opinion/z8cxLUZgb36ilapN9fZwdN/Raghuram-Rajan--Why-India-slowed.html when he talks about lack of availability of land being the reason for the slow down. But that is not all, he has forgotten to mention several other supply side factors such as the lack of availability of skilled labor, creation of productive assets (infrastructure) etc. as also factors that are seriously constraining growth. And that it is this serious supply side constraint that has resulted in a lack of capital now (with investments being held back). So we've arrived at a point where all the 3 factors of production (land, capital & labor) are in short supply. Is it any surprise then that growth is slowing down?
Rajam also talks about the lack of decision making (policy making) capacity & institutional capacity as the reason for the slowdown. In short compromised governance.

This is exactly what Modi et. al. are talking about - eliminating the supply side bottleneck by the using innovation and re-framing policies. And by putting emphasis on execution and governance. That is to my mind the correct remedy for India at the moment.

Clearly we also need people who have a track record of execution, governance and supply side thinking in the drivers seat to speed things up once more.

-tarun

Essentially Modi is a Supply side thinker. Manmohan a demand side thinker. 10 years od trying to stimulate the demand through cash and capital infusion has resulted in a grinding slow pace of enconomic growth laregly due to supply side constraints. Removing these supply side constrainst is what Modi (and BJP) is all about. Indeed Governance in India today is all about ensuring supply side efficiency and capacity. Demand generation is automatically fueled by the large young and aspiring population.

The present regime has choosen the easy way out. Modi et. al. are willing to do the hardwork. So sure was the present government that the aspiring millions would automatically result in the continued high economic growth that they almost compeletly disregarded the need to create the capacity in the system to carry higher growth.

Surprising that no one has articulated this. Modi baiters are too blinded by their dislike for him to acknowledge this. Infact they attempt to opfusicate the distinction by saying that the BJP and Congress have the same economic policies.

Raghuram Rajam talks about it briefly in his article on Why India Slowed down when he talks about the lack of avaiability of land being the reason for the slow down. But that is not all, he has forgotten to mention several other supply side factors such as the lack of avaiability of skilled labour, creation of productive assets (infrastucture) etc. as also factors that are seriousy constraining growth. And that it is this serious supply side constraint that has resulted in a lack of capital now (with investments being held back). So we've arrived at a point where all the 3 factors of production (land, capital & labour) are in short supply. Is it any surprise then that growth is slowing down?

Modi et. al. are talking about eliminating the supply side bottleneck by the using innovation and reframing policies. And by putting emphasis on execution. That is to my mind the correct remedy for India at the moment.

Clearly we also need people who have a tracker record of execution, governance and supply side thinking in the drivers seat to speed things up once more.