Executive summary .. 9 Assessment and recommendations 11 Chapter 1. India's key challenges to sustaining high growth .. 21 Economic reforms have transformed the Indian economy. 22 The economy has responded positively to the reforms 26 Looking into the future .. 41 Easing regulation in goods and service markets 44 Removing barriers to employment in the formal sector .. 46 Improving the efficiency of the financial system 49 Orienting public finances to achieve more rapid growth .. 50 Improving infrastructure 56 Improving education 63 Conclusions.. 66 Notes 66 Bibliography . 66 Chapter 2. India's growth pattern and obstacles to higher growth .. 69 Productivity gains from shifting labour out of agriculture have been modest 70 Manufacturing's contribution to growth could be much greater . 73 Evidence suggests that weaknesses in framework conditions are at fault.. 83 Notes 84 Bibliography . 85 Chapter 3. Reforming India's product and service markets 89 Despite extensive liberalisation in some areas regulations are on average rather restrictive .. 90 Policies to improve product market regulations 94 Notes 114 Bibliography . 115 Annex 3.A1. OECD PMR indicators by state. 117 Chapter 4. Improving the performance of the labour market .. 119 Employment has expanded in the economy as a whole, but not in the organised sector. 120 State-level labour reforms 130 What can feasibly be done to improve India's labour markets?.. 134 Notes 138 Bibliography . 140 Annex 4.A1. State labour reform questionnaire summary responses .. 143 Chapter 5. Reforming the financial system 145 The banking system 146 Other financial markets . 152 Foreign ownership. 157 Financial inclusion. 158 Conclusions.. 159 Notes 161 Bibliography . 161 Chapter 6. Improving the fiscal system .. 163 Improving the quality of government spending 164 India's tax system has been fundamentally reformed 168 Improving fiscal federalism to limit borrowing and increase responsiveness to local needs 179 Notes 191 Bibliography . 191 Chapter 7. Removing infrastructure bottlenecks 193 Infrastructure is a major constraint on growth. 194 The private sector has a crucial role to play in narrowing infrastructure gaps 195 Private sector involvement is transforming certain sectors 199 A more limited start has been made in other sectors 200 In other sectors, the framework is not conducive to competition 213 Notes 218 Bibliography . 219 Chapter 8. Improving human capital formation 221 Human capital needs to be improved 222 Deeper institutional changes are the best hope 230 Conclusion .. 238 Notes 239 Bibliography ..