India Economy: Short term pain..Long Term?

Thursday, December 11, 2008

The articles below outline issues which will determine future prospects...

  1. Global economic conditions are not getting better
  2. No industry is immune
  3. The Government is under a microscope as it deals with the Economic and Security crises.
India's growth has largely been a result of Government getting out of the way of Private dismantling of the license-raj has removed barriers for new businesses.  How is a government that has been told to get out of the way for the sake of progress going to tackle problems where it is the "DOER".  The only area that Government has been allowed to be the "initiator" is Defence and Security.  The record is woeful.

India can do little about 1) and 2) above; but to hear an influential voice like Jack Welch put the Government of India on notice is ominous.  Can an administration which has been sleeping for four and a half years respond to this challenge?  My skepticism of this administration is tempered by my belief in the strength of the people and their will to succeed.

“What will be the growth rate next year will largely depend on how the economy performs in the second half of the current fiscal.”
In the first half of this financial year (April-September), India’s economy expanded by 7.8%.The bank expects India to grow by 6.3% in 2008. The government has said India will grow by between 7% and 8% in 2008-09.
The bank’s Global Economic Prospects 2009 report estimated India’s growth next year at 5.8%, and said the world is on the brink of a rare recession
Yahoo to lay-off three percent in India

Small number, but the psychological impact is huge.

Mumbai terror strike may benefit China
“... all foreign companies can do right now is boost security for their people and wait. Meanwhile, many investors will be thinking about tilting the balance to China,” they wrote in a recent column for American publication BusinessWeek.
Noting that the possible slant towards China is understandable, the column said, “Despite persistent worker protests, the Olympics this summer left little doubt of the country’s ability to manage itself.”

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