Raguram Rajan's overview of Indian economic development

from ADB LLectures(via Bayesianheresy). From the concluding remarks of India: The Past and Its Future:
"Let me conclude with lessons I draw from India’s highly regulated past. First, India’s past policies relating to science and education, no matter how distorted, gave it capabilities in skilled manufacturing and in services, where its comparative advantage now lies. India should not sacrifice this advantage in a blind attempt to follow the East Asian path of unskilled, labor-intensive manufacturing. In particular, it should remove distortions that hold back its areas of strength: the overregulated higher education system and the sclerotic legal system. But it also needs to remove the disincentives for the creation of unskilled jobs, not just by getting rid of archaic job protection while building a genuine safety net for all workers, but also by improving infrastructure, especially in laggard states and rural areas so that they connect better to the larger economy.
Second, the government cannot simply legislate outcomes or achieve them by offering resources or subsidies, especially as the economy becomes more market-oriented. Indeed, such direction can be counterproductive. What the government intends and what materializes can be very different because of the way people react to policy. The government must focus instead on getting the environment right, and thus spread opportunity.
Third, the government, by and large, will not refocus in a vacuum. I do not believe that there will be a revolutionary change in government attitudes, because Indian society is not ready for it. Instead, I see a more evolutionary change⎯as more and more people in India obtain access and see opportunity in the market economy, they will press for a more enabling government, and Indian democracy will respond. The sooner this happens though⎯and reformers in government can play a role here in expanding access⎯the better it will be for India. For better governance and wider opportunity, rather than turning back from market-oriented reforms, will be the way to social justice and a more prosperous, fairer, India."

Bayesianheresy also links to Shanta Devarajan's post on "Why is service delivery particularly poor in India?". Excerpt:"First, especially compared with Bangladesh, India is an extremely heterogeneous society, with many castes, ethnic groups, languages and religions. There is some evidence that polarized societies find it more difficult to build political support for public goods. Second, to the extent that these services are transactions-intensive (a teacher has to spend time with students, docthttp://kufr.blogspot.com/2008/01/more-socialist-than-swedes.html#linksors with patients), caste or other differences may stand in the way of publicly-provided services working for some people. Low-caste people, for instance, have been excluded from some public schools and public clinics. They are able to obtain services in the private sector—because they pay for these services. Paradoxically, therefore, the fact that the Indian government mandated free and universal public education and health, and decided to finance and provide it from the public sector, may be the reason poor people are largely obtaining these services in the private sector."
P.S.(29th. Feb.) See Kuffir's response to Shanta Devarajan's post.And more here.