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 International Relations
US-India Relations: Ensuring Indian Prosperity in the Coming Demographic Boom
Heritage Foundation, India Friday, May 15, 2009

The U.S. has not played an important role in Indian economic development, but could help to identify crucial areas for economic liberalization and establish channels for private education financing. Demographic and economic conditions make primary and secondary education vital to India's future. With the public education system in tatters, the government needs to allow private education to contribute far more, writes Derek Scissors and Michelle Kaffenberger for Heritage Foundation.

India may be in the midst of an expansion that would position it as one of the three largest economies in the world. The challenges to sustained, rapid Indian growth are being broadly understated, though, especially during the national election season. India's young population is a clear long-term economic strength and projected population growth over the next two decades will all but guarantee a decent rate of economic growth. "Decent," however, does not trans­late into a meteoric rise up world rankings, nor will it satisfy voters' very high expectations.


To meet these expectations, India must use its bur­geoning labor force properly. This makes basic educa­tion and training needs even more pressing. There is already a pronounced shortage of adequately skilled workers. In addition, constant state interference curbs property rights and places firms and industries at a competitive disadvantage, suppressing employment.


The new Indian government, and the next several governments, should therefore make education and liberalization the highest economic priorities, even above clearly needed infrastructure development. Otherwise, the oncoming demographic wave will lead to large-scale underemployment, rather than innova­tion and rapid growth. Political parties will be blamed for a flawed development agenda rather than credited for leading India to the economic pinnacle.


A strong India is important to America for many reasons. First, a vibrant Indian economy would benefit the US and all of Asia. Second, India is an indispens­able partner in security issues in South Asia. Third, its political example is a model for the universality of democratic values--an appeal that constitutes America's greatest foreign policy strength. India's rise is a new dynamic factor in a geostrategic equation most prominently featuring China.


Although the US plays a smallish role in the Indian economy, it can do more to help India fulfill its promise, benefiting the US in the process. The Bush Administration established a sound diplo­matic and institutional basis for extending the US-India partnership.


The Obama Administration should build on this by using the US-India Education Foundation—or a new organization—to assist India with basic edu­cation and training for its expanding labor force. In addition, US government agencies should offer to assist their Indian counterparts in identifying the elements of market-oriented reform most effective for unleashing the Indian economy. The private sec­tors in both countries should be core participants in these discussions, which should focus on efficient use of capital and other resources to complement labor abundance to achieve sustained rapid growth.


Two Possible Futures

In 1

This article was published in the Heritage Foundation on Friday, May 15, 2009. Please read the original article here.
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