India’s next economic leap will be harder than the breakthrough movement of 1991, says Montek Singh Ahluwalia

admin — Mon, 01 Dec 2025 13:53:00 +0000

Indian economist and former Deputy Chairman of the Planning Commission of India, Montek Singh Ahluwalia, will virtually deliver the 4th B.P.R. Vithal Memorial Lecture at Centre for Economic and Social Studies (CESS) in Hyderabad on December 1, 2025.
| Photo Credit: Siddhant Thakur

India is entering an economic transition far more complex than the breakthrough movement of 1991, and must urgently adapt to its governance, fiscal strategy, State-level regulatory systems and external economic approach if it is to raise long-term growth from the current 6.5% GDP trend to 8%, said Economist and former Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia while virtually delivering the 4th B.P.R. Vithal Memorial Lecture at the Centre for Economics and Social Studies, Hyderabad on Monday (December 1, 2025).

Mr. Ahluwalia argued that India’s reform challenges are now qualitatively different from the early liberalisation phase, which mainly required persuading bureaucrats, while today’s problems cut across federal politics, climate pressures, technology disruptions and global geopolitical fragmentation.

He added that India’s domestic target of becoming a developed nation by 2047, as outlined in the Viksit Bharat vision, requires consistent real growth of about 8% and cautioned that such a shift cannot be assumed simply because recent quarterly numbers have occasionally touched higher levels. He stressed that the underlying growth rate remains around 6.5%, and while good policies can push it upwards, bad policies can lower it quickly in a volatile world.

Mr. Ahluwalia outlined three major global shifts that India must adjust to. The first is the sharp deterioration in the global geopolitical environment. The second shift is the transformation in global trade patterns as economies rethink supply chains, and the third shift is the acceleration of technological change.

“Unlike earlier waves of innovation that allowed labour markets time to adjust, current disruptions may eliminate large segments of modern-sector jobs very quickly, while creation of new jobs may lag,” he added.

Mr. Ahluwalia argued that India’s biggest development gaps remain health and education, both of which fall largely under State governments and require significant increases in public spending. He said agricultural research, climate-resilient farming, and water conservation will also need higher State-level expenditure.

At the same time, modernising industry and strengthening domestic R&D cannot be done without a larger central fiscal commitment, because private investment in research remains very low.

“Many policy discussions today list dozens or hundreds of reforms, but India needs a narrowed set of priorities for the next five years and a national consensus around them. India must choose credibility by aligning its tariff regime with economies that remain committed to open markets,” he said.

He further added that India should expect States to grow at different rates, which will lead to more migration. He said this is economically positive and will create political pressures, especially in richer States with slowing population growth that will need to attract labour.

Published – December 01, 2025 07:23 pm IST

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“Cut Down Larger States If India Wants 8% Growth”: Montek Singh Ahluwalia

admin — Wed, 12 Feb 2025 17:41:48 +0000

Bengaluru:

Former Deputy Chairman of the Planning Commission of India and economist Montek Singh Ahluwalia said on Wednesday that large states can be split so that new cities can emerge, giving impetus to urbanisation.

According to him, if India is going to grow at 8 per cent, then the urban population is going to grow more rapidly than cities’ infrastructure .

“I’m not suggesting what you should do in Karnataka, but it’s my general view. We should seriously consider cutting down many of the largest states into two or three,” said Ahluwalia.

He was addressing a session on ‘Resilient Pathways: Charting India’s Economic Growth Amid Global Challenges’ at Invest Karnataka 2025, being held here till February 14.

“Gandhiji said India lives in its villages, and many people still regard that as a sort of romantic vision. But I don’t think he said India will continue to do so 100 years later,” Ahluwalia added.

He said picking up some tier-2 towns and developing them into “near-metros” is the solution for over-saturated cities like Bengaluru, for instance. He said even though there “ought to be spilling over into other cities”, this does not happen organically.

“The only known cases in India where this happens is when a new state is carved out and a capital has to be created,” he added.

Ahluwalia recalled former UP Chief Minister and BSP leader Mayawati had suggested splitting her state into three.

“Had this been done, there would have been a political willingness instantly to create three new good cities,” he added.

He also pointed out that people have said this could be done in many other states.

“In Maharashtra, for example, there are people who said the Vidarbha region should be made a separate state with Nagpur as its capital,” he added.

While stating that tough decisions such as this are not politically easy, he said change happens only with interesting reforms.

“Don’t go back to 1991 for inspiration, because those were no brainer reforms, really. The world was speaking one language then,” he added.

“We started the reforms after Eastern Europe had abolished communism. There was only one thing to do which was integrating with the global market,” he explained further.

According to him, this has become much more complex now, as India is faced with a world that is now fragmented.

“Geopolitical tensions are now rising, the US has its own problems not only with its closest allies, like Canada and Mexico, but also with China. China is cozying up to Russia. Russia is becoming more dependent on China. Europeans are very scared of Russia. They are not so bothered about China,” he said.

Although he agreed that Bengaluru enjoys a lot of advantages, Ahluwalia added that making a city liveable is not just the result of getting a lot of companies to invest.

“There’s a whole lot of urban management that has to be done. The first thing that should be done is that the Bengaluru city government should be made hugely more efficient. Now, unfortunately, in our country, city governments don’t have much power, and that’s true of all states,” said Ahluwalia, apparently about city civic bodies.

Replying to a question by the moderator of the session, Salman Anees Soz, whether he wished he did something differently, Ahluwalia said when one does a reform, it’s not like planning the trajectory of a rocket.

“When they shoot up a rocket, there’s a nice trajectory drawn out. The slightest deviation from that trajectory is a problem. That’s not what you do with economic reforms,” he said.

According to him, when it comes to economic reforms, one has a broad idea, but one can’t do everything and one ends up doing what comes first.

“I think it’s very important to realise that in retrospect, it’s always arguable what you should have done first,” he added.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

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India’s next economic leap will be harder than the breakthrough movement of 1991, says Montek Singh Ahluwalia

“Cut Down Larger States If India Wants 8% Growth”: Montek Singh Ahluwalia