Growth depends on social norms, political culture, institutions; not just economic policies: Basu

Economic growth of a country depends on social norms, political culture and institutions, and these are deteriorating in India visibly from 2016, former Wolrd Bank chief economist said on Monday, emphasising that if these trends are not reversed then Indian dream will come to an end.

Economic growth of a country depends on social norms, political culture and institutions, and these are deteriorating in India visibly from 2016, former Wolrd Bank chief economist said on Monday, emphasising that if these trends are not reversed then Indian dream will come to an end. Participating in a webinar organised by the Institute for Human Development, Basu charged that the breakdown of social cohesion is beginning to hurt India.

"India's sharp economic slowdown started two years before the COVID-19 pandemic. The economy does not rely on economic policy alone. "The economy depends on social norms, on political culture, on institutions and on morals. And these are deteriorating in India visibly from 2016 and almost in tandem with the drop in growth," he said.

Basu, a professor of economics at Cornell University and former chief economic adviser to the finance ministry during the UPA regime, said that India's growth rate is coming down. In 2006, India was among the top three fastest-growing economies, India was beginning to look like East Asian economies, adding that now, India is 43rd fastest-growing economy in the world, Basu stated.

The eminent economist also alleged that Uttar Pradesh is an example of a break down of social cohesion in India. "What happened in the last 2-3 years in Uttar Pradesh is disturbing. The breakdown in law and order and rise in bigotry, the preaching of hatred against the minority, the silencing of dissent, goes against India's own tradition," he alleged.

Talking about the handling of India's COVID-19 pandemic, Basu said that India's poor management of the pandemic and economy worries him. "Clearly (nationwide) lockdown has not worked...we did lockdown without a supportive plan," he said.

Basu pointed out that India's savings and investment rates are going down since 2009-10 when it was 38 per cent. Basu also said that health and education sectors are going to grow post COVID-19 pandemic.

Asked his views on monetisation of the budget deficit, he said he is in favour of monetisation of the budget deficit because it is a very special situation..