India’s economy slows growth
State can ensure recovery
The coalition government of India celebrated the third anniversary in power. The date coincided with the fall of the rupee, a surge in inflation. These reports have increased pessimism on world markets. However, Delhi emphasized that the country would cope with difficulties due to the high level of savings, domestic demand and the mechanisms of financial regulation.
The Government of India, formed by the party of “The Indian National Congress” with the support of regional parties, has been in power for three years. This date coincided with the publication of negative publicity in the Indian and the Western press about the state of economy. “India, perhaps, is not going to the crisis of payment balance, but its macro-economic situation is deteriorating day by day … It was caused by the inconsistent domestic policies and global uncertainty generated by the complications in the Euro area,” – writes the Economic Times. The newspaper refers to data from a survey conducted among 58 CEOs of companies.
Other commentators point out that the exchange rate of rupee is falling, inflation is increasing, investments are reducing, foreign exchange reserves are dwindling. The slowdown makes the businessmen and political elite lose good spirits, which was previously optimistic about the future. Criticism of government is becoming more acute. Politicians are accused of populism, inertia and corruption. India desperately needs investment in the mining industry, roads, ports, housing. But entrepreneurs are cautious. Indian companies, which can not obtain a license or permission from the government on projects, are investing abroad.
Foreigners do not show enthusiasm either. The volume of investments in Indian stocks and bonds made only $ 16 billion in the previous fiscal year. Previously it amounted to $ 30 billion. This trend has accelerated in recent months, after the Finance Ministry in an attempt to stop the growth of the budget deficit, has proposed to impose new taxes on foreign corporations operating in India.
New York Tims says that all this is “disheartening those who hoped that India along with China and other non-Western countries will help to revive the global economy as it was after the 2008 crisis”.
But is the pessimism justified? Finance Minister Pranab Mukherjee said that there was no reason for it. Indian economy is able to flexibly respond to complications. Its stability is determined by a high level of domestic demand, domestic savings and effective mechanisms of state regulation. The minister stressed that a major part of GDP was formed thanks to domestic demand.
In 2011-2012, Indian economy, according to the government, was increased by 6.9%. And before the crisis in 2008, it had been increasing annually by 9%. Mukherjee also pointed out that the banking sector was in good shape, exports became more diversified, and its main flows were directed to developing countries.
In the interview with “Nezavisimaya Gazeta” the chief researcher from the Institute of Oriental Studies, Oleg Malyarov, noted that the negative outlook on the Indian economy in the West is often biased. Yes, the rates have declined, but the decline is not of a catastrophic nature. If the increase is 6% instead of 8-9%, the rate still remains quite satisfactory. Here in Russia, even 3 percent growth is considered good.
In India, the planning was not eliminated. “Planning Commission is working. Formally, this is an advisory body, acting at the highest political level, but not involved in daily management. However, the obligation to develop an overall plan and related policy actually involves the commission in the process of government regulation. “The central bank, the entire monetary system do not only solve current problems, but also focus on strategic objectives of the development. In short, the country has all the necessary tools to return to high growth rates, the expert concluded.