India's economic future uncertain, government 'has been on holiday'

India's government has "been on a holiday" for the past few years, holding off on important liberalization reforms, which now puts the economy in crisis and at risk, according to Columbia University professor Jagdish Bhagwati, in a recent interview with Bloomberg.

Without the growth that those reforms would have delivered, government revenues have been in decline.

"Revenue intake has been slowing down, and right now the real problem is…because of the impending elections next year, the government is busy doing more social spending. We already have inflation, this will add to it. You don't need to be an economist: if you're taking in less and spitting out more, inflation will follow."

When asked if India's economic woes are part of a broader emerging market downturn, Bhagwati said that there is confusion in the current literature. "It's entirely internal in my view. It's an Indian problem."

But Bhagwati doesn't think that India's economic problems will necessarily damage the health of the global economy:

"The rest of the world might even benefit, actually. As people begin to see India not as an area where you want to invest, they will be looking for other locations, which is the usual story. They have to put the money somewhere, right?"

Watch the video interview here.