Windjammer
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In ancient Rome, politicians famously used "bread and circuses" to win votes. For India, in a big state-election year, the government will likely turn to food and welfare programs, letting short-term politics cloud economic progress.
The government in 2011 already backtracked on promised reforms and stalled crucial projects. The price? New Delhi was unable to handle deteriorating macroeconomic fundamentals: Inflation has been running close to 10% for nearly two years; the rupee was the worst performing Asian currency against the dollar last year; and government finances were stretched--the fiscal 2012 deficit is now projected to breach the government's target of 4.6% of gross domestic product.
Though India was once a rising Asian giant, foreign investors are becoming increasingly bearish on the country. The WSJ's Deborah Kan talks to Paul Beckett about why India is no match to China.
Meanwhile, India's economy is slowing quicker than previously expected--the official GDP growth forecast for the year ending March 31 is 7.5%, down from 9% earlier, though many economists are more pessimistic.
India's reputation among global investors plummeted and is likely to suffer more in the months ahead. A series of important state elections will encourage vote-garnering initiatives such as an ambitious food security bill that guarantees food to millions of poor at a cost of about $26 billion over the next five years. The plan is noble, but without improving India's tattered food distribution and storage network, its main effect may be to put more strain on New Delhi's finances.
Optimists might find glimmers of hope in a decision last week to open up the stock market to qualified foreign investors--which could give a leg-up to capital inflows--or a slight recovery in manufacturing activity and employment last month.
But there is much work to be done, including reforming rules that restrict direct foreign investment into sectors like retail or aviation, starving them of capital and much-needed foreign expertise. Failure to efficiently tackle graft--even the government's flawed compromise bill couldn't get through the Parliament--is another ongoing problem.
For 2012, a crippled policy-making establishment will continue to mar India's promise. Investors should expect little more than short-term political considerations and economic damage control. It's best to watch this circus from the sidelines.
Heard on the Street: Investors Should Skip India's Circus - WSJ.com
Though India was once a rising Asian giant, foreign investors are becoming increasingly bearish on the country. The WSJ's Deborah Kan talks to Paul Beckett about why India is no match to China......watch the video in above link.
The government in 2011 already backtracked on promised reforms and stalled crucial projects. The price? New Delhi was unable to handle deteriorating macroeconomic fundamentals: Inflation has been running close to 10% for nearly two years; the rupee was the worst performing Asian currency against the dollar last year; and government finances were stretched--the fiscal 2012 deficit is now projected to breach the government's target of 4.6% of gross domestic product.
Though India was once a rising Asian giant, foreign investors are becoming increasingly bearish on the country. The WSJ's Deborah Kan talks to Paul Beckett about why India is no match to China.
Meanwhile, India's economy is slowing quicker than previously expected--the official GDP growth forecast for the year ending March 31 is 7.5%, down from 9% earlier, though many economists are more pessimistic.
India's reputation among global investors plummeted and is likely to suffer more in the months ahead. A series of important state elections will encourage vote-garnering initiatives such as an ambitious food security bill that guarantees food to millions of poor at a cost of about $26 billion over the next five years. The plan is noble, but without improving India's tattered food distribution and storage network, its main effect may be to put more strain on New Delhi's finances.
Optimists might find glimmers of hope in a decision last week to open up the stock market to qualified foreign investors--which could give a leg-up to capital inflows--or a slight recovery in manufacturing activity and employment last month.
But there is much work to be done, including reforming rules that restrict direct foreign investment into sectors like retail or aviation, starving them of capital and much-needed foreign expertise. Failure to efficiently tackle graft--even the government's flawed compromise bill couldn't get through the Parliament--is another ongoing problem.
For 2012, a crippled policy-making establishment will continue to mar India's promise. Investors should expect little more than short-term political considerations and economic damage control. It's best to watch this circus from the sidelines.
Heard on the Street: Investors Should Skip India's Circus - WSJ.com
Though India was once a rising Asian giant, foreign investors are becoming increasingly bearish on the country. The WSJ's Deborah Kan talks to Paul Beckett about why India is no match to China......watch the video in above link.
