For years, ever since the UPA came to power - and even before that when NDA ruled - PMs and FMs have espoused that India’s is the next growth story.
They have hinted that India, not China, will be the
next economic superpower. Everyone thought they were right - stockmarkets boomed, forex reserves shot up, growth threatened to cross the double-digit mark, and India became the global services czar. But now, slowly but steadily, red signals are flashing on many economic fronts. Economists talk about a slowdown. Stockmarkets are volatile, and no one knows whether stock prices will move northwards, or downwards. And inflation remains a key concern. All this is happening when the UPA coalition is getting ready for the general elections in 2009. B&E analyses the future of the exuberant India growth story. By A. SANDEEP, ASIF AHMED, VIRAT BAHRI, MANISH K. PANDEY AND GYANENDRA KASHYAP
A manufacturing slowdown?
The name ‘Gorilla’ comes from the Greek word Gorillai, which means a ‘tribe of hairy women’. Gorillas are seriously interesting creatures. Tamed, they can fight a pride of lions for you, er, as long as you have a two-metre, 250-watts electric shock-rod ready at your hand. Well, that’s exactly the India growth story right now. Undoubtedly, India’s growth saga is thundering upwards like nobody’s business; and, till now, almost all the indicators prove that. Strangely, some of the very factors that have led to this flamboyant growth in the recent past are now playing truant by restricting us from experiencing what could have been a dramatic transformative economic upswing, much more than the growth rates that we so proudly flaunt globally! And the blame lies completely with the policy makers, who have clearly erred in not utilising most required control measures in a timely fashion.
But first, a quick summary of the economic growth story. The February 2008 IMF India Assessment report mentioned that “over the past five years, average growth of 8¾% has made India one of the world’s fastest growing economies.” The report addsed that inflation has “remained contained,” current account deficits have been at a moderate level, factors which, as per IMF, “pay tribute to India’s sound macroeconomic policies and past structural reforms.” Although India’s growth rates have remained high, they have been relatively subdued – if we can call it that – in recent quarters. India’s GDP grew by a smashing 9.3% in Q1 2007-08 (but it was lower than 9.6% in Q1 2006-07). In Q2 2007-08, it was even lower at 8.9% (compared to 10.2% in Q2 2006-07). The IMF forecast for India’s GDP growth in this fiscal is 8.75%. Subir Gokarn, Chief Economist, Standard & Poor’s, Asia Pacific, told B&E, “India’s GDP growth is expected to be 8.6% during FY 2007-08.” Dharmakriti Joshi, Director and Principal Economist, Crisil, commented, “We expect the GDP growth to moderate further in 2008-09... to a little over 8%.” The cumulative GDP figure at current market prices at the end of Q2 2007-08 had reached $1.09 trillion. Interestingly, while India’s GDP – in PPP terms – in FY 2006-07 was $3.8 trillion, the World Bank downgraded it by 38% in January 2008 (quoting recalculation using a new methodology) to $2.34 trillion.
Comparatively, the manufacturing sector – as per RBI Q3 review – recorded “a lower growth of 9.8% during April-November 2007, as compared to 11.8% during April-November 2006.” Dr. Dalip Kumar, Consultant, NCAER, revealed, “Non-farm activities, manufacturing and services... are either slowing down or just maintaining their trajectory of growth.” RBI itself accepts that the slowdown is due to “decelerated/negative growth in 11 out of the 17 manufacturing industry groups”; the 11 sectors account for a whopping 49.3% weight in the Index of Industrial Production (IIP). Frankling Templeton, though, does mention in its January 2008 ‘Market Snapshot’ that “the composition of IIP hasn’t changed to reflect new economic drivers and sectors; and the government is expected to introduce a new index with... new weights and a wider basket of items.”
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
They have hinted that India, not China, will be the
next economic superpower. Everyone thought they were right - stockmarkets boomed, forex reserves shot up, growth threatened to cross the double-digit mark, and India became the global services czar. But now, slowly but steadily, red signals are flashing on many economic fronts. Economists talk about a slowdown. Stockmarkets are volatile, and no one knows whether stock prices will move northwards, or downwards. And inflation remains a key concern. All this is happening when the UPA coalition is getting ready for the general elections in 2009. B&E analyses the future of the exuberant India growth story. By A. SANDEEP, ASIF AHMED, VIRAT BAHRI, MANISH K. PANDEY AND GYANENDRA KASHYAPA manufacturing slowdown?
The name ‘Gorilla’ comes from the Greek word Gorillai, which means a ‘tribe of hairy women’. Gorillas are seriously interesting creatures. Tamed, they can fight a pride of lions for you, er, as long as you have a two-metre, 250-watts electric shock-rod ready at your hand. Well, that’s exactly the India growth story right now. Undoubtedly, India’s growth saga is thundering upwards like nobody’s business; and, till now, almost all the indicators prove that. Strangely, some of the very factors that have led to this flamboyant growth in the recent past are now playing truant by restricting us from experiencing what could have been a dramatic transformative economic upswing, much more than the growth rates that we so proudly flaunt globally! And the blame lies completely with the policy makers, who have clearly erred in not utilising most required control measures in a timely fashion.
But first, a quick summary of the economic growth story. The February 2008 IMF India Assessment report mentioned that “over the past five years, average growth of 8¾% has made India one of the world’s fastest growing economies.” The report addsed that inflation has “remained contained,” current account deficits have been at a moderate level, factors which, as per IMF, “pay tribute to India’s sound macroeconomic policies and past structural reforms.” Although India’s growth rates have remained high, they have been relatively subdued – if we can call it that – in recent quarters. India’s GDP grew by a smashing 9.3% in Q1 2007-08 (but it was lower than 9.6% in Q1 2006-07). In Q2 2007-08, it was even lower at 8.9% (compared to 10.2% in Q2 2006-07). The IMF forecast for India’s GDP growth in this fiscal is 8.75%. Subir Gokarn, Chief Economist, Standard & Poor’s, Asia Pacific, told B&E, “India’s GDP growth is expected to be 8.6% during FY 2007-08.” Dharmakriti Joshi, Director and Principal Economist, Crisil, commented, “We expect the GDP growth to moderate further in 2008-09... to a little over 8%.” The cumulative GDP figure at current market prices at the end of Q2 2007-08 had reached $1.09 trillion. Interestingly, while India’s GDP – in PPP terms – in FY 2006-07 was $3.8 trillion, the World Bank downgraded it by 38% in January 2008 (quoting recalculation using a new methodology) to $2.34 trillion.
Comparatively, the manufacturing sector – as per RBI Q3 review – recorded “a lower growth of 9.8% during April-November 2007, as compared to 11.8% during April-November 2006.” Dr. Dalip Kumar, Consultant, NCAER, revealed, “Non-farm activities, manufacturing and services... are either slowing down or just maintaining their trajectory of growth.” RBI itself accepts that the slowdown is due to “decelerated/negative growth in 11 out of the 17 manufacturing industry groups”; the 11 sectors account for a whopping 49.3% weight in the Index of Industrial Production (IIP). Frankling Templeton, though, does mention in its January 2008 ‘Market Snapshot’ that “the composition of IIP hasn’t changed to reflect new economic drivers and sectors; and the government is expected to introduce a new index with... new weights and a wider basket of items.”
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2008
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