cloud_9
SENIOR MEMBER
- Joined
- Jul 16, 2010
- Messages
- 4,921
- Reaction score
- -2
- Country
- Location
Indian Economy-News & Updates
- Thread starter Flintlock
- Start date
ebr77
FULL MEMBER
- Joined
- Apr 3, 2011
- Messages
- 885
- Reaction score
- 0
Airtel's special pack for Indians traveling to Bangladesh
Airtel mobile customers traveling to these two countries can make local calls at just Rs 1, while calling back home will cost Rs 10.
Indians traveling to Sri Lanka or Bangladesh will have one thing less to worry about. Airtel, which has operations in these two countries as well, has announced a new tariff for its customers in India, under which they will be able to make local calls in the country at Rs 1, while calling back home will cost them Rs 10. Incoming calls will be charged at Rs 10 only.
These rates are valid for all the Airtel India consumers traveling to these two countries. Hence they do not have to buy a special pack to avail these rates.
Both these countries fall in the 'Rest of the World' category for almost all the telecom operators in India which means that ISD calls and roaming rates in these countries were among the highest. However, this offer makes them the cheapest now, at least for Airtel customers.
Airtel mobile customers traveling to these two countries can make local calls at just Rs 1, while calling back home will cost Rs 10.
Indians traveling to Sri Lanka or Bangladesh will have one thing less to worry about. Airtel, which has operations in these two countries as well, has announced a new tariff for its customers in India, under which they will be able to make local calls in the country at Rs 1, while calling back home will cost them Rs 10. Incoming calls will be charged at Rs 10 only.
These rates are valid for all the Airtel India consumers traveling to these two countries. Hence they do not have to buy a special pack to avail these rates.
Both these countries fall in the 'Rest of the World' category for almost all the telecom operators in India which means that ISD calls and roaming rates in these countries were among the highest. However, this offer makes them the cheapest now, at least for Airtel customers.
kak1978
FULL MEMBER
- Joined
- Dec 31, 2009
- Messages
- 323
- Reaction score
- 0
India cuts main interest rate to 8% to help lift growth
India has cut its main interest rate for the first time in three years in a move that may signal a shift in focus to growth from inflation.
The Reserve Bank of India (RBI) lowered its key rate to 8% from 8.5%.
Analysts had expected a smaller, quarter of a percentage point rate cut.
However the central bank, which had increased interest rates 13 times since March 2010, said that growth was now at levels that warranted a bigger intervention.
Especially as India's domestic and foreign business environment was not improving as quickly as many people had hoped following the global economic crisis, and was being hamstrung by continuing problems in the eurozone.
The reduction in the interest rate "is based on an assessment of growth having slowed below its post-crisis trend rate," said RBI governor Duvvuri Subbarao.
According to the latest figures, India's gross domestic product expanded by 6.1% between October and December, from a year earlier, the weakest pace of growth in almost three years.
Inflation scenario
On top of this, a report on Monday showed that consumer prices rose by 6.89% in March from a year earlier, down from 6.95% in February.
"It is apparent that the central bank's main concern is more on the growth side rather than inflation, and this surprise cut is certainly in order to give a fillip or a boost to growth," said Devendra Pant of Fitch Ratings.
However, despite this the bank warned that inflation still remained a challenge.
"Food inflation, after a seasonal decline, has risen again," the RBI warned in its statement.
"Crude oil prices are expected to remain high and the pass-through of past price increases in the international market to domestic petroleum product prices remains significantly incomplete."
As a result, some economists expect today's rate cut to be the last one for 2012.
The "RBI is indicating that there is limit for further rate cut expectation, and I think they are pretty much done with further rate cuts this year", said Rajeev Malik who is an economist at CLSA in Singapore.
Source: BBC
India has cut its main interest rate for the first time in three years in a move that may signal a shift in focus to growth from inflation.
The Reserve Bank of India (RBI) lowered its key rate to 8% from 8.5%.
Analysts had expected a smaller, quarter of a percentage point rate cut.
However the central bank, which had increased interest rates 13 times since March 2010, said that growth was now at levels that warranted a bigger intervention.
Especially as India's domestic and foreign business environment was not improving as quickly as many people had hoped following the global economic crisis, and was being hamstrung by continuing problems in the eurozone.
The reduction in the interest rate "is based on an assessment of growth having slowed below its post-crisis trend rate," said RBI governor Duvvuri Subbarao.
According to the latest figures, India's gross domestic product expanded by 6.1% between October and December, from a year earlier, the weakest pace of growth in almost three years.
Inflation scenario
On top of this, a report on Monday showed that consumer prices rose by 6.89% in March from a year earlier, down from 6.95% in February.
"It is apparent that the central bank's main concern is more on the growth side rather than inflation, and this surprise cut is certainly in order to give a fillip or a boost to growth," said Devendra Pant of Fitch Ratings.
However, despite this the bank warned that inflation still remained a challenge.
"Food inflation, after a seasonal decline, has risen again," the RBI warned in its statement.
"Crude oil prices are expected to remain high and the pass-through of past price increases in the international market to domestic petroleum product prices remains significantly incomplete."
As a result, some economists expect today's rate cut to be the last one for 2012.
The "RBI is indicating that there is limit for further rate cut expectation, and I think they are pretty much done with further rate cuts this year", said Rajeev Malik who is an economist at CLSA in Singapore.
Source: BBC
Dance
SENIOR MEMBER
- Joined
- Jul 20, 2010
- Messages
- 4,850
- Reaction score
- 0
IMF cuts India's growth forecast for 2012 to 6.9%
NEW DELHI: The International Monetary Fund (IMF) on Tuesday lowered India's growth forecast for 2012 to 6.9%, from 7% earlier, citing policy inertia and slower growth in the rest of the world.
"In some economies, such as India, domestic factors also contributed to the slowdown, as a deterioration in business sentiment weakened investment and policy tightening raised borrowing costs," the IMF said in its latest World Economic Outlook.
India is now expected to grow at a slower pace this calendar year than the 7.2% it clocked in 2011. The IMF, however, kept India's growth forecast for 2013 unchanged at 7.3%.
The report said India needs to tighten more on the fiscal policy front as it has little room for maneuverability. "A number of economies in emerging Asia have room to make policy more supportive of economic activity (a notable exception is India), given favourable debt dynamics," the IMF said, adding that more tightening than currently projected appears necessary in India.
The government recently projected a fiscal deficit of 5.1% of GDP for 2012-13.
The report noted that there was need to tackle policy uncertainty and supply bottlenecks in the near term to ensure that potential growth does not decline. Potential growth is the maximal rate of growth a country can achieve without fanning inflationary pressures.
The IMF said that further support from monetary authorities is limited as there is little room for further easing due to underlying inflationary pressures.
The report outlined that there is an upside risk for global inflation, which in turn would mean lower global growth. It put special emphasis on the ongoing uncertainty with respect to oil exports from Iran that accounts for about a third of global crude oil exports.
"The oil price shock could also trigger a reassessment of the sustainability of credit booms and potential growth in emerging Asia, leading to hard landings in these economies," the report said.
The IMF called for better fiscal management in advanced countries, which would help sustain demand and also lead them on to a path of sustained fiscal consolidation. Noting that problems within the Euro zone have partly affected Asia's growth prospects, the report said that credit from the Euro zone has been curtailed while exports have also diminished.
Consequently, India's external balance is expected to deteriorate in the current year. The current account deficit is expected to increase to 3.2% in 2012, from 2.8% in 2011.
The IMF said that addressing infrastructure bottlenecks and enhancing governance and public service delivery could help India kick-start private investments
IMF cuts India's growth forecast for 2012 to 6.9% - The Economic Times
NEW DELHI: The International Monetary Fund (IMF) on Tuesday lowered India's growth forecast for 2012 to 6.9%, from 7% earlier, citing policy inertia and slower growth in the rest of the world.
"In some economies, such as India, domestic factors also contributed to the slowdown, as a deterioration in business sentiment weakened investment and policy tightening raised borrowing costs," the IMF said in its latest World Economic Outlook.
India is now expected to grow at a slower pace this calendar year than the 7.2% it clocked in 2011. The IMF, however, kept India's growth forecast for 2013 unchanged at 7.3%.
The report said India needs to tighten more on the fiscal policy front as it has little room for maneuverability. "A number of economies in emerging Asia have room to make policy more supportive of economic activity (a notable exception is India), given favourable debt dynamics," the IMF said, adding that more tightening than currently projected appears necessary in India.
The government recently projected a fiscal deficit of 5.1% of GDP for 2012-13.
The report noted that there was need to tackle policy uncertainty and supply bottlenecks in the near term to ensure that potential growth does not decline. Potential growth is the maximal rate of growth a country can achieve without fanning inflationary pressures.
The IMF said that further support from monetary authorities is limited as there is little room for further easing due to underlying inflationary pressures.
The report outlined that there is an upside risk for global inflation, which in turn would mean lower global growth. It put special emphasis on the ongoing uncertainty with respect to oil exports from Iran that accounts for about a third of global crude oil exports.
"The oil price shock could also trigger a reassessment of the sustainability of credit booms and potential growth in emerging Asia, leading to hard landings in these economies," the report said.
The IMF called for better fiscal management in advanced countries, which would help sustain demand and also lead them on to a path of sustained fiscal consolidation. Noting that problems within the Euro zone have partly affected Asia's growth prospects, the report said that credit from the Euro zone has been curtailed while exports have also diminished.
Consequently, India's external balance is expected to deteriorate in the current year. The current account deficit is expected to increase to 3.2% in 2012, from 2.8% in 2011.
The IMF said that addressing infrastructure bottlenecks and enhancing governance and public service delivery could help India kick-start private investments
IMF cuts India's growth forecast for 2012 to 6.9% - The Economic Times
cloud_9
SENIOR MEMBER
- Joined
- Jul 16, 2010
- Messages
- 4,921
- Reaction score
- -2
- Country
- Location
Mobile phones have to display radiation levels by September: DoT - The Economic Times
NEW DELHI: The new and stringent radiation emission rules for mobile phones and towers, which will for the first time stipulate emission levels for handsets sold in India and make it compulsory for these levels to be displayed on phones and retail outlets, will come into effect from September 1, 2012, telecom department officials said.
All handset makers, mobile phone companies and tower cos will be informed of the deadline before April-end, the telecom department (DoT) officials quoted above added. ET had first reported in November 2011 that the government had finalised radiation emission norms for cellphones and towers.
Radiation emitted by cellphones varies from instrument to instrument and is measured in terms of specific absorption rate (SAR) - the amount of radio waves absorbed by the body tissue when a phone is in use. The new rules state that cellphones can be imported and sold in India only if the SAR level is below 1.6 watts per kg (W/kg).
So far, India had unofficially followed European norms, which state that the maximum SAR level must not exceed 2 W/kg. According to the industry body representing handset makers, nearly 650 models of low-end Chinese handsets don't comply with the new emission standards and will have to be redesigned.
Radiation limits for towers have also been tightened to a tenth of the existing exposure level. The government has rejected the demands from the industry that the new norms for tower companies be deferred.
Tower companies are mandated to provide self-certifications on compliance, and the telecom department has decided that all such certifications from this month onwards will be covered by the new norms.
According to the new rules, the SAR value, or the radiation emitted by the handset, must be specified on the device, its manual, the box as well as the websites of both the company and the telecom department.
The radiation figure of each handset model must also be displayed prominently at all retail outlets that sell mobile phones. For consumers, the cost of acquiring a cellphone is set to go up by a minimum of Rs 400. The new rules make it mandatory for all handsets to be sold with a hands free device, as the government believes this step will help reduce the exposure to radiation significantly.
Tata Comm secures funding for Cable & Wireless bid: Report - The Economic Times
Tata Communications Ltd has secured bank financing ahead of an April 19 deadline to decide whether to make a bid for London-listed Cable & Wireless Worldwide, Thomson Reuters publication Basis Point reported on Wednesday.
The size of the loan has changed from the originally intended $2 billion, the report said, but it is not clear if it has increased or decreased, the report said, citing sources familiar with the situation.
Tata Communications is competing with mobile phone giant Vodafone Plc on the bid for C&W Worldwide. Both have time up to Thursday to decide whether to make a bid to seek further extension..
Mumbai-listed Tata Communications has received underwritten commitments from five banks: Standard Chartered Bank, ANZ, DBS Bank, ING Bank and State Bank of India, the report added.
StanChart and Morgan Stanley are M&A advisers to Tata Communications, but Morgan Stanley is not providing funding, the report added.
NEW DELHI: The new and stringent radiation emission rules for mobile phones and towers, which will for the first time stipulate emission levels for handsets sold in India and make it compulsory for these levels to be displayed on phones and retail outlets, will come into effect from September 1, 2012, telecom department officials said.
All handset makers, mobile phone companies and tower cos will be informed of the deadline before April-end, the telecom department (DoT) officials quoted above added. ET had first reported in November 2011 that the government had finalised radiation emission norms for cellphones and towers.
Radiation emitted by cellphones varies from instrument to instrument and is measured in terms of specific absorption rate (SAR) - the amount of radio waves absorbed by the body tissue when a phone is in use. The new rules state that cellphones can be imported and sold in India only if the SAR level is below 1.6 watts per kg (W/kg).
So far, India had unofficially followed European norms, which state that the maximum SAR level must not exceed 2 W/kg. According to the industry body representing handset makers, nearly 650 models of low-end Chinese handsets don't comply with the new emission standards and will have to be redesigned.
Radiation limits for towers have also been tightened to a tenth of the existing exposure level. The government has rejected the demands from the industry that the new norms for tower companies be deferred.
Tower companies are mandated to provide self-certifications on compliance, and the telecom department has decided that all such certifications from this month onwards will be covered by the new norms.
According to the new rules, the SAR value, or the radiation emitted by the handset, must be specified on the device, its manual, the box as well as the websites of both the company and the telecom department.
The radiation figure of each handset model must also be displayed prominently at all retail outlets that sell mobile phones. For consumers, the cost of acquiring a cellphone is set to go up by a minimum of Rs 400. The new rules make it mandatory for all handsets to be sold with a hands free device, as the government believes this step will help reduce the exposure to radiation significantly.
Tata Comm secures funding for Cable & Wireless bid: Report - The Economic Times
Tata Communications Ltd has secured bank financing ahead of an April 19 deadline to decide whether to make a bid for London-listed Cable & Wireless Worldwide, Thomson Reuters publication Basis Point reported on Wednesday.
The size of the loan has changed from the originally intended $2 billion, the report said, but it is not clear if it has increased or decreased, the report said, citing sources familiar with the situation.
Tata Communications is competing with mobile phone giant Vodafone Plc on the bid for C&W Worldwide. Both have time up to Thursday to decide whether to make a bid to seek further extension..
Mumbai-listed Tata Communications has received underwritten commitments from five banks: Standard Chartered Bank, ANZ, DBS Bank, ING Bank and State Bank of India, the report added.
StanChart and Morgan Stanley are M&A advisers to Tata Communications, but Morgan Stanley is not providing funding, the report added.
russellpeters
FULL MEMBER
- Joined
- Oct 1, 2011
- Messages
- 438
- Reaction score
- 0
interesting legislation.
cloud_9
SENIOR MEMBER
- Joined
- Jul 16, 2010
- Messages
- 4,921
- Reaction score
- -2
- Country
- Location
India overtakes Japan to become third-largest economy in PPP
NEW DELHI: Its economy may be in the grips of a slowdown, its polity paralysed and markets morose, but all this hasn't prevented India from overtaking Japan to become the world's third-largest economy in purchasing power terms.
Data just released by the International Monetary Fund (IMF) shows that India's gross domestic product in purchasing power parity (PPP) terms stood at $4.46 trillion in 2011, marginally higher than Japan's $4.44 trillion, making it the third-biggest economy after the United States and China.
India's share in world GDP in terms of PPP, a measure of relative consumer prices across countries, stood at 5.65% in 2011 against Japan's 5.63%, with the gap expected to widen significantly by 2017. In five years, the IMF estimates the share of India's GDP in PPP terms would grow to 8.09% compared with 4.8% for Japan.
Economists said India's move up the league table was a reminder of the boundless potential the country offered, despite the prevailing mood of pessimism.
"This basically turns the spotlight back on the tremendous opportunity India's growth story has even under the given conditions. If India plays its cards correctly through policy measures we can actually achieve much more in the next 5-10 years," said Saugata Bhattacharya, chief economist with Axis Bank.
Added Samiran Chakraborty, chief economist with Standard Chartered India: "This shows that India is no longer an emerging economy. It has already emerged. But beyond that there are not many conclusions one can take from the data." The PPP system allows GDP comparisons to be made by asking how much money would be needed to purchase the same goods and services in two countries and using that to calculate an implicit foreign exchange rate.
Under this method, a dollar should be able to buy the same amount of goods anywhere in the world and exchange rates should adjust accordingly. It also strips away distortions that come with market exchange rates, which are often volatile, affected by political and financial factors that do not lead to immediate changes in income and tend to understate the standard of living in poor countries.
The Economist magazine's proprietary Big Mac Index, which takes the price of a McDonald burger across 120 countries to calculate the 'real' price of their currencies, is another crude way to measure PPP. India was included in the index recently. It showed that the Indian rupee was undervalued by 62% against the US dollar in January.
PPP methods help adjust income to prices for a meaningful comparison on quality of life in countries with widely different prices and incomes.
"The PPP comparison is more useful while comparing the standards of living between countries," said Ulrich Bartsch, a senior macroeconomist in the World Bank's India office, adding that while the per capita GDP in PPP terms shows that India still has some distance to go to reach Japanese levels, "the difference is less than the comparison of per capita GDP in nominal dollar terms would indicate".
NEW DELHI: Its economy may be in the grips of a slowdown, its polity paralysed and markets morose, but all this hasn't prevented India from overtaking Japan to become the world's third-largest economy in purchasing power terms.
Data just released by the International Monetary Fund (IMF) shows that India's gross domestic product in purchasing power parity (PPP) terms stood at $4.46 trillion in 2011, marginally higher than Japan's $4.44 trillion, making it the third-biggest economy after the United States and China.
India's share in world GDP in terms of PPP, a measure of relative consumer prices across countries, stood at 5.65% in 2011 against Japan's 5.63%, with the gap expected to widen significantly by 2017. In five years, the IMF estimates the share of India's GDP in PPP terms would grow to 8.09% compared with 4.8% for Japan.
Economists said India's move up the league table was a reminder of the boundless potential the country offered, despite the prevailing mood of pessimism.
"This basically turns the spotlight back on the tremendous opportunity India's growth story has even under the given conditions. If India plays its cards correctly through policy measures we can actually achieve much more in the next 5-10 years," said Saugata Bhattacharya, chief economist with Axis Bank.
Added Samiran Chakraborty, chief economist with Standard Chartered India: "This shows that India is no longer an emerging economy. It has already emerged. But beyond that there are not many conclusions one can take from the data." The PPP system allows GDP comparisons to be made by asking how much money would be needed to purchase the same goods and services in two countries and using that to calculate an implicit foreign exchange rate.
Under this method, a dollar should be able to buy the same amount of goods anywhere in the world and exchange rates should adjust accordingly. It also strips away distortions that come with market exchange rates, which are often volatile, affected by political and financial factors that do not lead to immediate changes in income and tend to understate the standard of living in poor countries.
The Economist magazine's proprietary Big Mac Index, which takes the price of a McDonald burger across 120 countries to calculate the 'real' price of their currencies, is another crude way to measure PPP. India was included in the index recently. It showed that the Indian rupee was undervalued by 62% against the US dollar in January.
PPP methods help adjust income to prices for a meaningful comparison on quality of life in countries with widely different prices and incomes.
"The PPP comparison is more useful while comparing the standards of living between countries," said Ulrich Bartsch, a senior macroeconomist in the World Bank's India office, adding that while the per capita GDP in PPP terms shows that India still has some distance to go to reach Japanese levels, "the difference is less than the comparison of per capita GDP in nominal dollar terms would indicate".
Sashan
SENIOR MEMBER
- Joined
- Feb 11, 2012
- Messages
- 4,289
- Reaction score
- 1
Finally, Finance relents: will change FEMA to allow FDI from Pakistan - Indian Express
After dragging its feet for almost four months, the finance ministry has agreed to amend the Foreign Exchange Management Act (FEMA) to allow foreign direct investment from Pakistan into India. Citing security concerns, FEMA currently bars investments from Pakistan, the only country to be singled out.
Commerce told Finance about its Pak FDI proposal last October, but there was no word from the latter until last week. On April 13, after a meeting with visiting Pak federal minister Makhdoom Amin Fahim, Commerce and Industry Minister Anand Sharma announced an “in-principle decision” to allow Pak business to invest in India.
After dragging its feet for almost four months, the finance ministry has agreed to amend the Foreign Exchange Management Act (FEMA) to allow foreign direct investment from Pakistan into India. Citing security concerns, FEMA currently bars investments from Pakistan, the only country to be singled out.
Commerce told Finance about its Pak FDI proposal last October, but there was no word from the latter until last week. On April 13, after a meeting with visiting Pak federal minister Makhdoom Amin Fahim, Commerce and Industry Minister Anand Sharma announced an “in-principle decision” to allow Pak business to invest in India.
kak1978
FULL MEMBER
- Joined
- Dec 31, 2009
- Messages
- 323
- Reaction score
- 0
And the government has replaced the Railway minister.
cloud_9
SENIOR MEMBER
- Joined
- Jul 16, 2010
- Messages
- 4,921
- Reaction score
- -2
- Country
- Location
Dance
SENIOR MEMBER
- Joined
- Jul 20, 2010
- Messages
- 4,850
- Reaction score
- 0
Growing pains as India struggles with slowdown
It is touted as one of the emerging giants, but growth has come off the boil, reforms are grinding to a halt, and Delhi seems stuck in a state of permanent policy paralysis.
INDIA has been touted as one of the superstars of the Asian century. But it's only 2012 and the giant's credentials are already being put to the test.
Not long ago some pundits were saying India's rate of economic expansion could surge into double figures and soon overtake China as the world's fastest-growing major economy. But sentiment has shifted rapidly.
The latest figures show GDP growth at 6.1 per cent - a drop of more than a two percentage points from a robust 8.3 per cent recorded towards the end of 2010.
Earlier this week, the International Monetary Fund pared back its forecast for India's economic growth - the only emerging economy to get a downgrade.
The Indian government has bravely predicted growth to bounce back to 7.6 per cent next financial year. But the recent slowdown has raised fears that the Indian economy is entering a period of moderate economic activity. If a bad monsoon this year cuts agricultural production, India's rate of expansion could fall further. The Reserve Bank of India signalled its concern about sagging growth when it cut official interest rates by 50 basis points on Tuesday, reversing a two-year interest rate policy tightening cycle.
While growth of 6 per cent compares very will with most Western economies, it's well down on India's trend rate of 8.5 per cent GDP growth recorded during the major part of last decade. And in a giant developing country such as India, the loss of economic momentum will take a toll. India's rapidly expanding and aspirational middle class depends on robust economic conditions. About 20 million young Indians are reaching working age each year and strong growth is crucial for their employment prospects.
Government finances are also under threat. Last month's national budget showed India's deficit had ballooned to nearly 6 per cent of GDP in 2011-12 and is projected to remain above 5 per cent next financial year. Public debt stands at about 65 per cent of GDP, higher than other big emerging economies, including Brazil. India's fiscal problems mean it is in a weaker position than many other emerging nations.
India's growth slowdown has drawn attention to a much deeper problem: a policy paralysis hampering the economy.
Amitendu Palit, an economist at the Institute of South Asian Studies at the National University of Singapore, warns that India's policy inertia appears to be entrenched.
''Stunted progress on economic reforms seems inevitable,'' he says in a new paper titled "Economic Reforms in India: Perpetuating Policy Paralysis".
Two decades have passed since India announced a process of free-market reform that gradually opened up the economy and nurtured rapid growth over the past decade.
Palit says most of the earlier reforms, while significant, left many important markets such as land and labour almost untouched. The need for further sweeping reforms is urgent but momentum for change has stalled.
One of the main reasons for this is India's increasingly fragmented politics. Major parties, such as the Congress and BJP, have been forced into unwieldy coalitions with small, regionally based parties in order to govern. The payoffs required to maintain the support of the minor parties is ''one of the biggest challenges facing political governance in modern India'', Palit says.
It is routine for small parties to block legislation that they suspect could be politically damaging. Doing this helps them gain political mileage in their relatively narrow local constituencies.
''Virtues of economic reforms have become distinctly marginal to those of ad hoc populism so much so that political parties and personalities are uninterested in pushing reforms even stealthily or surreptitiously,'' Palit writes.
The ruling Congress Party has been plagued by debilitating charges of corruption and did poorly in recent elections in India's biggest state, Uttar Pradesh. With a national election scheduled in 2014, Congress leaders are unlikely to antagonise current and potential political partners by pushing for reforms.
Meanwhile, the rate of investment in India, which grew rapidly last decade, has fallen away sharply as investors lose confidence.
''Foreign investors are clearly at a loss to figure out why a $US1.6 trillion economy capable of growing at 8 per cent or more annually is unable to pass bills in its Parliament,'' Palit says.
The World Bank recently attributed delays and uncertainty surrounding implementation of economic reforms as one of the key factors behind a declining rate of investment. It projects a growth slowdown in India's south this year due to a deceleration in investment produced by domestic policy inertia and uncertainty about regulatory changes.
No one wants India's growth to slow, but its recent economic history shows bad economic times have been good for reform. Periods of action by the Indian government have typically been when the chips are down and it has been easier to overcome objections. Political opponents also see less political mileage to be made by resorting to populist measures during growth downswings.
Palit points out that the two phases of most intense economic reform, 1991-94 and 2001-03, have been marked by relatively low growth.
''In the Indian context, bad economic times could be good excuses for moving ahead on reforms without worrying much about their political fallout.''
How low would growth have to drop to provoke the government into action? ''I suppose the 3-4 per cent growth range is what can do the trick,'' Palit says. ''Anything above 5 per cent would not be enough.''
Australia has a lot riding on Asia's economic success. But managing the rapid transition of huge economies such as India and China presents enormous policy challenges. The current slowdown in India, and its worrying policy paralysis, is a reminder that the economic transition will often be difficult.
The Asian century promises to be good to Australia. But at times it will be a bumpy ride.
Growing pains as India struggles with slowdown
It is touted as one of the emerging giants, but growth has come off the boil, reforms are grinding to a halt, and Delhi seems stuck in a state of permanent policy paralysis.
INDIA has been touted as one of the superstars of the Asian century. But it's only 2012 and the giant's credentials are already being put to the test.
Not long ago some pundits were saying India's rate of economic expansion could surge into double figures and soon overtake China as the world's fastest-growing major economy. But sentiment has shifted rapidly.
The latest figures show GDP growth at 6.1 per cent - a drop of more than a two percentage points from a robust 8.3 per cent recorded towards the end of 2010.
Earlier this week, the International Monetary Fund pared back its forecast for India's economic growth - the only emerging economy to get a downgrade.
The Indian government has bravely predicted growth to bounce back to 7.6 per cent next financial year. But the recent slowdown has raised fears that the Indian economy is entering a period of moderate economic activity. If a bad monsoon this year cuts agricultural production, India's rate of expansion could fall further. The Reserve Bank of India signalled its concern about sagging growth when it cut official interest rates by 50 basis points on Tuesday, reversing a two-year interest rate policy tightening cycle.
While growth of 6 per cent compares very will with most Western economies, it's well down on India's trend rate of 8.5 per cent GDP growth recorded during the major part of last decade. And in a giant developing country such as India, the loss of economic momentum will take a toll. India's rapidly expanding and aspirational middle class depends on robust economic conditions. About 20 million young Indians are reaching working age each year and strong growth is crucial for their employment prospects.
Government finances are also under threat. Last month's national budget showed India's deficit had ballooned to nearly 6 per cent of GDP in 2011-12 and is projected to remain above 5 per cent next financial year. Public debt stands at about 65 per cent of GDP, higher than other big emerging economies, including Brazil. India's fiscal problems mean it is in a weaker position than many other emerging nations.
India's growth slowdown has drawn attention to a much deeper problem: a policy paralysis hampering the economy.
Amitendu Palit, an economist at the Institute of South Asian Studies at the National University of Singapore, warns that India's policy inertia appears to be entrenched.
''Stunted progress on economic reforms seems inevitable,'' he says in a new paper titled "Economic Reforms in India: Perpetuating Policy Paralysis".
Two decades have passed since India announced a process of free-market reform that gradually opened up the economy and nurtured rapid growth over the past decade.
Palit says most of the earlier reforms, while significant, left many important markets such as land and labour almost untouched. The need for further sweeping reforms is urgent but momentum for change has stalled.
One of the main reasons for this is India's increasingly fragmented politics. Major parties, such as the Congress and BJP, have been forced into unwieldy coalitions with small, regionally based parties in order to govern. The payoffs required to maintain the support of the minor parties is ''one of the biggest challenges facing political governance in modern India'', Palit says.
It is routine for small parties to block legislation that they suspect could be politically damaging. Doing this helps them gain political mileage in their relatively narrow local constituencies.
''Virtues of economic reforms have become distinctly marginal to those of ad hoc populism so much so that political parties and personalities are uninterested in pushing reforms even stealthily or surreptitiously,'' Palit writes.
The ruling Congress Party has been plagued by debilitating charges of corruption and did poorly in recent elections in India's biggest state, Uttar Pradesh. With a national election scheduled in 2014, Congress leaders are unlikely to antagonise current and potential political partners by pushing for reforms.
Meanwhile, the rate of investment in India, which grew rapidly last decade, has fallen away sharply as investors lose confidence.
''Foreign investors are clearly at a loss to figure out why a $US1.6 trillion economy capable of growing at 8 per cent or more annually is unable to pass bills in its Parliament,'' Palit says.
The World Bank recently attributed delays and uncertainty surrounding implementation of economic reforms as one of the key factors behind a declining rate of investment. It projects a growth slowdown in India's south this year due to a deceleration in investment produced by domestic policy inertia and uncertainty about regulatory changes.
No one wants India's growth to slow, but its recent economic history shows bad economic times have been good for reform. Periods of action by the Indian government have typically been when the chips are down and it has been easier to overcome objections. Political opponents also see less political mileage to be made by resorting to populist measures during growth downswings.
Palit points out that the two phases of most intense economic reform, 1991-94 and 2001-03, have been marked by relatively low growth.
''In the Indian context, bad economic times could be good excuses for moving ahead on reforms without worrying much about their political fallout.''
How low would growth have to drop to provoke the government into action? ''I suppose the 3-4 per cent growth range is what can do the trick,'' Palit says. ''Anything above 5 per cent would not be enough.''
Australia has a lot riding on Asia's economic success. But managing the rapid transition of huge economies such as India and China presents enormous policy challenges. The current slowdown in India, and its worrying policy paralysis, is a reminder that the economic transition will often be difficult.
The Asian century promises to be good to Australia. But at times it will be a bumpy ride.
Growing pains as India struggles with slowdown
AbhijitSingh
BANNED
- Joined
- Jan 15, 2012
- Messages
- 450
- Reaction score
- 0
Dance
SENIOR MEMBER
- Joined
- Jul 20, 2010
- Messages
- 4,850
- Reaction score
- 0
Latest posts
-
Bajwa calls Bushra's allegations against Saudi Arabia 'baseless'
- Latest: Novus ordu seclorum
-
-
-
-
Pakistan Affairs Latest Posts
-
Bajwa calls Bushra's allegations against Saudi Arabia 'baseless'
- Latest: Novus ordu seclorum
-
-
-
-
