ABSTRACT
India is widely recognised as an emerging global economic power. Indian economy recorded a 9.7 per cent growth rate in the fiscal year 2006–07. 1 This is evidence enough for an economy to be called a high-performing economy. The sustained high rate of economic growth in the 2000–05 period has allowed India to join the club of high performing economies of Southeast Asia and China. Indian policy makers have been encouraged to pursue the on-going reform programme more vigorously as it is their firm belief that high growth is the result of a liberal economic policy. Therefore, Indian policy makers are preparing to achieve a double digit rate of growth towards the end of the Eleventh Five-Year Plan period, i.e., 2011 (Government of India 2008). FDI has been seen as a dominant determinant in achieving a high rate of economic growth because it brings in scarce capital resource, raises technological capability and increases efficiency by enhancing domestic competition. The Chinese experience of achieving high growth through FDI has been cited as a policy lesson worth emulating for the Indian economy. However, skeptics have argued that the high growth rate of the Indian economy is path-dependent and it is the long experience of institution building which has ultimately resulted into high rate of economic growth. Further, the structure of the Indian economy is highly oriented towards rural areas and its people and large sections of the population are still very poor and lack the essential capabilities to participate in the modern process of economic growth. There is growing evidence of marginalisation of large sections of the rural population and increasing unemployment in the rural areas. The Economic Advisory Council of the Prime Minister (EACPM) of India has recently cautioned about the adverse consequences of such a grave situation in the face of a high-performing Indian economy (EACPM 2006). The market-oriented policies normally have an exclusionary impact which needs to be prevented through articulate response of the policy makers. Therefore, this article strives to examine current status and future prospects of the Indian economy with special reference to the role of FDI in achieving a higher rate of economic growth and the removal of structural constraints.
