WASHINGTON CONSENSUS AND ECONOMIC GROWTH IN DEVELOPING ECONOMIES: THE INDIAN EXPERIENCE

This paper takes a long-term look, (forty-three years; 1980-2023) at macroeconomic management in India in the context of the Washington consensus prescriptions. The study reveals significant structural breaks in India’s economy at different integration orders, indicating that liberalization policies and economic reforms in general have long-term impact on the Indian economy. The Indian economy seems to have experienced a structural break in 2007 due to rapid economic growth and increased global integration stemming from reforms before then. Policy reforms, for example, liberalizing FDI, trade openness, taxes, and exchange rate reforms. Good governance policies by, successive Indian governments further supported these outcomes. Pre-2007 empirical evidence showed that exchange rates, foreign direct investments, and tax revenues supported economic growth, but not significantly. The Indian economy faced challenges due to limited export competitiveness, high import dependency, fluctuating capital flows, and a mismatch between the skills available within the Indian labour force and those required by foreign companies. Post 2007, FDI had significant but negative effects on India’s economic growth. With the foregoing, the paper submits that many of the Washington consensus variables have played an important role in India’s economic growth performance during the period under study. Whether India has deliberately or unconsciously adopted the Washington Consensus Prescriptions should not be of much importance to economic development researchers. This study suggests that India’s economic growth has been significantly boosted by exchange rate reforms since the 1990s. The Reserve Bank should monitor the forex market, build foreign exchange reserves, and promote exports. Accelerating economic growth could be achieved by consolidating fiscal management, improving governance and expanding social spending. Simplifying FDI policy, enhancing private sector attractiveness, and strengthening institutional frameworks are also recommended