The Resurgence of India: Triumph of Institutions Over Infrastructure?

Recent economic growth in India has raised its potential to be an economic giant, along with the United States and China. One unique aspect of the Indian economy is that tremendous economic growth has been achieved despite weak infrastructure, resource shortages, and other travails that restrict growth in emerging economies. Recent economic explanations suggest that institutions supporting the economy and economic development are vital to sustained economic growth and may even be more important than infrastructure development. Examining the historic context of the Indian economy, we contend that vital market institutions were always present in India and that economic reforms have unleashed the full potential of these institutions. Using some industry examples, the authors argue that economic policies that strengthen market institutions may be more important compared to conventional policies geared toward infrastructure development.