Make no mistake about it; the first decade of the new millennium will be hailed as India's-a decade in which not only will India clock the highest per capita growth rate among all major economies (including China) but also when the level of this growth will exceed 7.5 per cent.

Wild dreams, you might say; actually, hard reality, made harder by the fact that the forecast is not dependent upon the government, whatever its colour, making any decision voluntarily. The key word is voluntarily-because the government of the day will be compelled to initiate several reforms.

The factor making all this possible is globalisation. The reforms that timid governments do not make, will be 'forced' upon them by the pressure of competition. Take the case of small-scale reservations. India lost several employment and income benefits because of its Luddite policy of prohibiting large investments in sectors like toys and another 1,000-odd items. China took advantage of India's stupidity and today has more than two-thirds of the world's toy market. Why did India have this policy-nobody knows, except you can bet that the licensing and the reserving authorities make large amounts of money dispensing this ''in the name of the poor'' policy.

Note that it is not lack of knowledge that has prevented action. The Abid Hussain committee recommended some years back that this policy be dismantled. India takes its time and the next year or two should see the pressure of global competition forcing us to open up.

Another uniquely Indian bad policy is one of strangulating industry through exceptionally high interest rates. With inflation close to zero and expected to stay there for some time, industry is borrowing at about 10 per cent real, the highest rate globally for a non-crisis economy. And it has been paying such rates for six years! Any wonder then that the much-touted reforms of 1991 did not produce a higher industrial growth rate?

A little-known fact is that Indian industry has grown at the same rate post reforms as it did pre-reforms! How did this happen? Simple. The policy makers forgot the financial and macro sector as they concentrated on getting the micro-trade sector right. Making matters worse were the family-owned ostrich-like Indian industries that did not care about high interest rates because they could borrow from state-owned banks and never pay up. Instead, they concentrated on the prevention of trade reforms and the perpetuation of high tariff rates-higher than even Ethiopia's.

But the game has been exposed now-and the professionally managed industry sees no reason to subsidise the inefficient family-wallahs. Industrial growth has stagnated to near-zero levels, and the government even has a committee report suggesting discontinuance of the high real interest rate policy-and this despite pressures from lobbyists who believe that real rates are too low in India!

One policy that awaits a final clean-up is India's tax system. There are more income tax exemptions than rich taxpayers in India. The tendency of every born-again policy maker is to raise tax rates for higher revenues-outdated politics and terrible economics. Exactly the opposite is desirable. A healthy policy would be the following: no exemptions, and tax rates of 5, 15 and 25 per cent, and a reduction in the corporate tax rate from 35 to 25 per cent.

The reason for genuine optimism is that the Indian economy resembles an onion-you peel off a layer of distortion, and you cry, because there are so many layers left. But it is precisely these layers of distortions-three of the more important ones have been detailed above-which will lead to a faster pace of growth. Each 1 percentage point reduction in the real rate is expected to lead to a 0.35 percentage point increase in the GDP growth. Interest rate reforms should decrease the lending rate by at least 400 basis points or cause a 1.4 per cent increase in GDP growth. Small scale de-reservation and an enlightened tax policy will easily add 1.6 per cent to GDP growth. Thus an 8.5 per cent GDP growth (a rise of 3 per cent over the 20-year average of 5.8 per cent) is in India's future; and it will happen sooner than later. Why is it bound to happen? Because the Chinese bamboo is pinching our collective bottoms, and the pressure to grow fast to reduce the gap with China will only grow larger.