Right now, the 'world is on fire,' says economist Larry Summers. India's neighbours — Pakistan, Sri Lanka and Bangladesh have all gone to IMF for help. But India is rock solid, with plaudits pouring in.
However, before getting euphoric, look at the chart below giving the changes in per capita income in nominal dollars for the four countries.
All four countries were very poor in 1980. Pakistan was numero uno ($294), followed by Sri Lanka ($269), India ($267) and Bangladesh ($216). By 1990, Sri Lanka had taken the lead, a remarkable performance given its two civil wars, with the Tamil Tigers in the north and the Marxist Janatha Vimukthi Peramuna (JVP) in the south.
But after a long period of socialism till 1978, the country had switched to economic liberalisation, which helped greatly.
In 1990, Sri Lanka's per capita income was $467. India ($369) had edged ahead of Pakistan ($346), but was about to crash to $304 in its 1991 balance of payment crisis. Bangladesh still brought up the rear with $294.9.
The collapse of the Soviet Union in 1991 ended socialist tendencies everywhere.
All the Indian subcontinent's countries embarked on economic liberalisation. But making the transition took time. Just when things were looking up, especially for India, the subcontinent was hit by the Asian financial crisis (1997-99), followed by the worst drought for a century in 2000.
Sri Lanka, the most liberalised and the least drought-hit (it benefits from both the South-West and North-East monsoons), galloped ahead to $870.