Can India Become an Economic Superpower or Will There Be a Monetary Meltdown? (2005)

In 2005, I returned to Britain thanks to an invitation from Professor Patrick Minford of the Cardiff Business School, Cardiff University, to deliver a lecture on India’s Money at his Economics Seminar.
“Wednesday 13 April 2005 Dr Subroto Roy /India’s Money/ 4.30pm, Room S01 (Economics Seminar Series)

The same lecture was delivered at the Institute of Economic Affairs, London, a fortnight later under the title “Can India Become an Economic Superpower or Will There Be a Monetary Meltdown?”. The IEA’s summary of the lecture was as follows
27 April 2005

“Leading Indian economist, Dr. Subroto Roy discusses the prospects of the Indian economy and warns of dangers ahead.

Can India become an economic superpower or will there be a monetary meltdown?

Dr. Roy discussed the prospects for the Indian economy at a lecture at the IEA on 27th April. Below is a synopsis of his lecture, outlining his hopes and concerns.

New technological progress in a myriad of ways, as well as the discovery of new resources, plus a possible peace-dividend arising from reduced regional tensions and conflict, are all important factors contributing to real economic growth in India today.

While the real side of the economy does well, the “nominal” economy, within the Government’s control, displays disconcerting trends. Continual deficit financing for half a century has led to exponential growth of public debt and broad money. The vast growth of time-deposits in banks may have been misinterpreted as indicating a real phenomenon such as unusual savings behaviour when it is more likely to be a nominal phenomenon resulting from increasing amounts of government debt being held by the largely nationalised banking sector. (The same may be true of China).

Twenty-one years ago, the author’s IEA Occasional Paper No. 69, Pricing, planning and politics: a study of economic distortions in India, proposed microeconomic reforms provoking the Times‘ lead editorial of May 29 1984. Some of these came to be implemented following the author’s role as a senior adviser to Rajiv Gandhi in 1990-1991. Now, monetary and fiscal reforms of a classical liberal nature are vitally necessary if a macroeconomic meltdown is to be prevented. Important among these are complete budgetary transparency, fiscal discipline improving the social productivity of all public expenditure, and monetary and financial policies to restore the integrity of the currency at home and abroad. Dr. Roy was Wincott Professor at the Department of Economics at the University of Buckingham last year. He is editor of Margaret Thatcher’s Revolution available from the recommended books page of the IEA’s website.”

When I returned to India, I was invited to give the same lecture on May 5 2005 to the Reserve Bank of India’s Monetary Economics Seminar, chaired by Chief Economist Dr Narendra Jadav; the invitation came thanks to the intervention of Dr S. S. Tarapore. I subsequently informed a few of India’s key monetary policy decision-makers of these lectures, and I was happy to see policy talk emanating from Delhi and Bombay becoming a little less drunken and disorderly than it had been before.

Subroto Roy, April 14 2007


Margaret Thatcher’s Revolution: How it Happened and What it Meant

Margaret Thatcher’s Revolution: How it Happened and What it Meant, edited by Subroto Roy & John Clarke, London & New York: Continuum, 2005, 2006.