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 Article written by Soutik Biswas Soutik Biswas Delhi correspondent

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  • 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
    +2

    Comment number 5.

    Another good question was how much of the stated growth was real, and not result of numbers-jugglery (already speculated on by Indian Express).

    (factoid: G2 Bulletin has revealed iceberg-tip--already a horror-story--of the extent of numbers-jugglery which China uses)

  • rate this
    +2

    Comment number 8.

    A Country which has more Poors then all the Africans countries put together,a country whos over 200 Districts out of total 600 r not under Gov't control n run by separatists and a country where Majority Population's armed gangs harass the minorities on daily basis and treat them as untouchables and deny their basic rights of freedom is a failed state where economic n social injustic is flourishing

  • rate this
    +1

    Comment number 9.

    The Only Solution to every Peoblem of Peoples living India is to disintegrade India into its original states and let the peples decide their own fate, the So Called Upper Class has been sucking the blood of poors, Farmers,gov't servents, minorities etc for the last 65 years n there is no end in the sight poors are getting poorer and richers r getting richer n Minorities r crying for independence.

  • rate this
    +1

    Comment number 11.

    @9 How will disintegrating India to its constituent states solve problems?One of the key issues is population growth, which has resulted in 300m becoming 1200m in 65 years.The total number at the bottom of the pyramid has increased immensly.One of the key solutions is to have zero population growth.
    Planning and management are not Indian attributes.Chaos rules..and the real problems escalate.

 

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