Is the India growth story over?

 
India factory The Indian economy grew at the slowest rate since 2003

Prepare For Worse, a newspaper warns its readers on Friday, on the back of reports that the economy has grown at its slowest pace in nine years.

Goodbye 2020, Hello 1991!, says another, alluding to the 1991 meltdown, which sent India scurrying to the IMF for a bailout.

Are things so dire with Asia's third-largest economy? Is the India growth story coming to an end?

Fiscal and trade deficits are soaring, the rupee is at a historic low, reforms are stalled due to obdurate politics and a hesitant government, inflation is high and investment and consumption are down. Growth in key manufacturing and infrastructure has dipped sharply.

Services, usually a double-digit growth booster, are hovering around 8%. Most worryingly, farm growth is at a below 2% and a below-normal monsoon has been forecast. It is ironical that all this is happening under the leadership of an Oxford-educated economist.

The government has been attributing the downturn to the global economy catching a cold. But it is clearly more than that.

For clues listen to Bimal Jalan, former governor of India's central bank and a respected economist. "There's something happening that we are not quite in grips with so something needs to be done," he told a business channel.

Dr Jalan believes that a deeper structural and systemic problem is wreaking havoc with the economy.

"You can import as much oil as you want, you can pay for it because your reserves are high, and your exports are doing reasonably well even though they may not have done so well in one or two quarters. Your current account deficit is higher than you expected, but still we can afford it, there is no great problem. So what is it that's lacking and that we don't have?" he wonders.

What India doesn't have is a bipartisan, mature political consensus on the direction that the economy must take. How can a small group of politicians in the parliament stymie major reforms? Has India's politics and economy become hostage to petty interests, helped abundantly by a government which is seen as effete and weak?

A broken politics makes for a broken economy. Does India need political reforms first before it can even dream about moving on significant economic reforms?

 
Soutik Biswas, Delhi correspondent Article written by Soutik Biswas Soutik Biswas Delhi correspondent

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  • rate this
    0

    Comment number 18.

    Oh Soutik, there you go again. Get a grip on world's economy and europe's one esp. at the moment, everybody is slowing down as is the case with India.

  • rate this
    0

    Comment number 17.

    Let the Oxford-educated economist work in peace till 2014 without any leg pulling and compare the result. Also, i am sure it high time for a PM who has some dignity left for himself, should call in for an early election.

  • rate this
    +3

    Comment number 16.

    You do not turn a mediaeval country into a modern country, just by building a few pieces of modern infrastructure. You do it by changing the psychology of your population from Superstitious to Rationalist.
    It is no easy task and requires hard headed determination. China achieved it after more than a decade of intense, deliberate pain.
    The result however is undeniable.

  • rate this
    0

    Comment number 15.

    I think we need to change the Political system. We need a 2 or 3 party state, but not a multi party state. The problem is in Multi Party every one is self involved and no one cares for the Nation.

  • rate this
    +1

    Comment number 14.

    Corruption is one of the major problems in India. Because of corruption India's growth story has become farce, superficial. Development is concentrated mostly in big cities. There are thousands of villages which do not have access to basic amenities like health, toilet etc. and hence people defecate in open. Also Indian laws are not same for everyone in practice. Rich always get away with crimes.

 

Comments 5 of 18

 

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