WSJ: India Growth Slows to Decade Low, Pressing Government

Discussion in 'Economy & Infrastructure' started by mylegend, Jun 3, 2013.

  1. mylegend

    mylegend Regular Member

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    NEW DELHI—India's economy grew at its slowest annual rate in a decade, building pressure on the government to take more ambitious action to reinvigorate the ailing economy.
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    A laborer at an aluminum smelting factory in Mumbai in this March file photo.

    Gross domestic product rose 5.0% in the fiscal year ended March 31, after a 6.2% increase in 2012 and annual rates of over 9% for a row of years before the global financial crisis of 2008.

    The weak data will add pressure on the Congress party-led United Progressive Alliance national coalition government, which already is facing criticism it has inadequately sought to tackle persistent problems that have dragged on growth, including high inflation and burgeoning fiscal and current account deficits.

    Boosting growth will be key for the Congress party to improve its chances of being re-elected for a third consecutive term at national polls scheduled to be held before May 2014.

    While growth of 5% would be high for a developed Western economy, such a rate is insufficient in India to create enough new jobs for a young workforce.

    Data also released Friday showed output grew 4.8% on year between January and March, in line with market expectations and a touch quicker than 4.7% in the preceding quarter.

    Robert Prior-Wandesforde, an Asia-based economist with Credit Suisse, CSGN.VX +1.45% said there was some cause for optimism in those numbers but the data doesn't warrant the "popping of champagne corks."

    India's economic growth powered ahead in the mid-2000s as investors warmed to a country which appeared to be throwing off its Socialist-inspired economic policies and opening up to greater foreign investment.

    But in the past few years the narrative has changed. Foreign businesses have shunned the nation amid concerns about the slow pace of economic changes to make it easier to invest in the country. A focus instead on state-led social spending has widened the fiscal deficit, while huge oil imports have ballooned the trade gap.

    That in turn, has hurt the rupee currency, which is currently trading at an 11-month low of 56.50. At the same time, inflation of near double digits has forced the central bank to keep interest rates high.

    Exports, too, have fared poorly due to the slowdown in the U.S. and Europe. Even the country's IT outsourcing companies, once the symbol of shining India, have begun to face headwinds.

    Also Friday, the government said it narrowed its fiscal deficit to 4.9% of GDP in the last fiscal year, below the 5.2% estimate made in the federal budget announced in February. But the level is still way above the government's 3% target and has led ratings firms to warn India's sovereign debt could soon be downgraded to non-investment-grade status.

    Prime Minister Manmohan Singh last fall unveiled a series of reforms meant to kick start the economy, including allowing greater investment in sectors such as retail, broadcasting and aviation. The government also has sought to improve its finances by lowering expensive state subsidies on fuel and raising taxes to curb gold imports, the main driver of India's record-high trade deficit.

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    Many of these measures have been neutered by a growing protectionist sentiment in the country. Many Indian states, for instance, have opposed allowing foreign supermarkets to set up and have opted not to apply these regulations in their regions.

    Businesses have for months been calling on the Reserve Bank of India—the central bank—to cut rates to jump start growth. The RBI, worried about inflation and encouraging more imports, has cut its key lending rate by 0.75 percentage point this year, much less aggressively than industry leaders wanted.

    The Associated Chambers of Commerce and Industry of India, an industry lobby group, said Friday's data give out a strong indication that a turnaround in the economy is still far away and "there is a real reason for worry, requiring drastic measures from the government and the RBI."

    Many observers say the government should allow greater foreign investment in other sectors, including local pension fund management companies and insurance firms.

    Friday's GDP data showed growth in manufacturing output slowed to 1.0% in the last fiscal year from 2.7% the year before. Growth in services such as hotels and transport slowed to 8.6% from 11.7% while farm output growth slowed to 1.9% from 3.6%.

    —Prasanta Sahu contributed to this article.
     
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  3. Tianshan

    Tianshan Regular Member

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    5% is not bad actually considering the global economic conditions.
     
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  4. MAYURA

    MAYURA New Member

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    Bad for a developing economy like India
     
  5. Tianshan

    Tianshan Regular Member

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    all developing countries went through a big downturn last year in growth rates.
     
  6. MAYURA

    MAYURA New Member

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    From what I know China is more export oriented economy and is still developing but has not seen massive fall in its growth rate unlike we indians.

    What is disturbing is that IIP is very low and in many months was negative thus making mock of indian economy.
     
  7. datguy79

    datguy79 Regular Member

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    At least you are not Brazil...
     
  8. Singh

    Singh Phat Cat Administrator

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    Yes, although 5% means there has been a 90-100bn$ addition in the economy. Although, in reality the common man has nor the middle class has been tremendously benefited by this particular growth because of rising inflation.
     
  9. SinghSher1984

    SinghSher1984 Tihar Jail Banned

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    It's mainly due to an energy shortage, 2/3rds of coal plants run on 2 week stocks when the optimal level is 6 months +.

    Some of the biggest coal projects are sitting empty due to shortages, a big reason for the land grab in the red belt as the gov. is forcing people off land to give access to corporations.

    It was said a few years ago, can China grow without eventually being torn apart by few freedoms, and can India grow without being held back by the bad hard infra.

    It remains to be seen, all I can say is the circle of life always dominates; too much blood has been spilled for either and many other countries to remain together in a healthy fashion.

    I need only take us back to 29 years and 3 days ago, or to 47.
     
  10. TrueSpirit

    TrueSpirit Senior Member Senior Member

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    Forget It....Trace my IP if you can
    Well, in a country like India, there would not be any shortage of energy, provided we go all the way in commercializing the full potential of non-conventional sources: especially Solar energy, tidal energy, hydrogen fuel cells, biofuels (ethnol & biodiesel), biomass energy & wind energy & maybe, thorium based plants (future). t is rather unfortunate that Suzlon is making losses & not many are ready to bail them out of their debt troubles.

    But, there have been tremendous amount of development & innovations in the above mentioned fields, especially in the West. We need to buy these patents from the inventors by paying them suitable royalty & integrate the acquired technology in our R&D efforts.

    Anyway, everyone knows what needs to be done but our polity would not allow such a grand material transformation to happen in the energy sector. Entrenched players are too big & influential (PSU Unions, Reliance, Tata, etc.) so any such initiative is usually scuttled effectively even before it can take off. So, everything boils down to electoral, bureaucratic reforms & judicial reforms.

    Then, there is excessive focus on Nuclear energy & too limited on the above sources, which is a policy mistake. Nuclear projects have the longest gestation periods & govt. has a total monopoly on this sector for obvious reasons.

    Power is one area in our infrastructure which is in most dire need of reforms. Private players of all size should have full access & level field in all the 3 domains of Production, transmission & distribution. Tenders should not be formulated in such a way that new players are screened out at Level-1 itself.
     
  11. Ray

    Ray The Chairman Defence Professionals Moderator

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    Not to worry.

    When the money is put to constructive good, the scenario will change.

    Right now, there are too many fingers in the pie! ;)
     
  12. no smoking

    no smoking Senior Member Senior Member

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    The question is where you can find the money--Indian has been running on fiscal deficit and trade deficit for a long time.
     
  13. Ray

    Ray The Chairman Defence Professionals Moderator

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    All in good time.

    Calm before the storm!
     
  14. hello_10

    hello_10 Tihar Jail Banned

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    the US+EU markets are finished now and it does have an effect on the Indian market too. i think, even 5%+ growth for this fiscal is 'not bad', as it will be the growth without any external support/orders, with covering the losses on the trade side with West too......:thumb:

    and about fiscal deficit, we find its around 5% only, which is 'good', in fact, for an economy which would have at least 5%+ growth in this tough time..... and about deficit on the trade side, we find Indian currency maintaining the same value during 2012, to 2013 till now, which also means that somehow someway currency didn't face as much pressure that it would fall. and in fact, recent surge in Gold import, along with maintaining the currency level, is all a good sign, showing strength of Indian currency while covering the trade losses :thumb:

    and i find things so good on the foreign trade side that there is even hefty outward FDI from India too as below, which still doesn't effect the currency level :truestory:


    => thats the fiscal deficit of India while comparing other as below, we don't find India on any crisis in either way, while we do know that an "Emerging Developing" like India would at least have 5% growth with 5% inflation, while the same is just not possible with the developed economies like US/UK as below :nono:

     
    Last edited: Jun 5, 2013
  15. hello_10

    hello_10 Tihar Jail Banned

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    here we have growth data's for the major emerging economies (BRIC/E7) for 2012 as below. i can't see India doing very bad as compare to others in so bad external market :ranger:

     
  16. hello_10

    hello_10 Tihar Jail Banned

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    thats a very true, and until Indian currency fall dramatically, we don't find any problem on the CAD side too.......

    true Indian currency value would be at around, INR 1.0 = 1.5 Pakistani Rupees, to 1.0 Yuan = INR 10. and for that, Indian Rupees gotto depreciates to USD 1.0 = INR 65 (around)...... hence until current CAD brings the Indian Currency to this level, we find this 'over valued' INR is still unaffected by the current CAD level :ranger:
     
  17. hello_10

    hello_10 Tihar Jail Banned

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    we have latest news about Fiscal Deficit of India as below, its still well within 5% :ranger:

     

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