Although high interest rates and resulting higher costs—coupled with high oil prices, decelerating global growth, slowing export markets, depreciation of the rupee and the global financial turmoil—have taken their toll on India's economy the Indian government maintains that the Economy will continue to grow at close to 8%. The Economist Intelligence Unit, is however less optimistic and estimates a growth of close to 6.5% for the next two fiscal years. The article claims that this is not all bad news because although the country’s growth rate will slow down it will still be among the fastest growing economies of the world. Moreover, the article claims that the current global situation is making India’s measured pace of economics reform look “wiser than before.” “At a time when Western countries are frantically nationalizing banking assets, the Indian government's reluctance to sell more than 49% in its state-owned banks—which control some 70% of banking assets—now seems reassuring. In addition, India has not yet introduced full capital-account convertibility, which protects its currency, while its careful control of foreign borrowings by domestic companies limits dependence on the global financial system. Regulators have also periodically introduced curbs to slow the formation of potential asset bubbles, such as higher provisioning and prudential requirements on real-estate lending.” The article claims that once the world moves towards a more stable platform, India is likely to emerge as an attractive destination for investment. Although India has not escaped the global crisis, Indian companies seem to be looking for opportunities in the crisis.
Being from India, I think I somewhat identify with this never say die attitude. Having lived in Mumbai, the commercial capital of India I can well picture how the country is ready to bounce back and make the best of what it has. I think its really interesting that in spite of being caught in the crisis, it is expected that the country may actually benefit in the long run.
1 comment:
A 6.5% growth rate is still pretty good considering how much other economies like the US will be affected by the crisis. It's interesting to me how India's banks are heavily regulated, and this what may be helping them weather the crisis that is pushing the US and UK towards a recession.
The monitoring of potential bubbles also seems like a good move on the Indian government's part. In the US it seems there is a cycle of letting bubbles grow without much regulation and having to clean up the damage after they burst.
Though globalization means that India will be affected by shocks in the global financial system despite control of foreign loans, I share Anisha's sense of optimism in that controlled growth in India will help them recover quickly.
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