ADB warns India against reform slowdown

"Historically, India’s economic strategy differed widely from that of its East and Southeast Asian neighbours, with much greater state control of production and distribution," it said.

"Low investment productivity resulted from India’s planning strategy, which was characterised by the distrust of the price mechanism, a preference for administrative controls and a belief in self-reliance that negated the efficient use of foreign trade and technology." The report said the Indian reform process initially focussed on achieving macroeconomic stabilisation through fiscal adjustment and imprved balance of payments management.

"To this end, the authorities have eased financial sector controls, strengthened prudential regulation and reduced trade restrictions. However, in each of these cases, the reforms have been modest at best. Markets for land, labour and capital are still highly distorted, many government officials continue to be lukewarm about foreign investment and the transaction costs for investors remain high,” ADB said.

"Much more comprehensive reforms are necessary for Indian firms to be able to compete in world markets. In addition, the sustainability of the reform process is far from clear – India still lacks the consensus for open markets and integration with the world economy that is required for more rapid growth," it said.