INDIA STRUGGLES TO REGAIN CONTROL AS ELEPHANT ECONOMY DOES ABOUT-TURN
Rhys Blakely
The Times, August 4, 2008
The rise of India's economy is often compared to the progress of an elephant - slow and plodding when compared with the dragon of China, but invested with a heavy sense of inevitability. In the past six months, however, the elephant has performed a disconcerting about-turn.
In January India appeared to be in excellent shape. Annual GDP growth was close to 9 per cent, corporate profitability had risen by 20 per cent in a year and the stock market had surged 50 per cent. The elephant was trundling along at full speed.
Seven months later, Bombay's benchmark Sensex index has lost 40 per cent of its value and foreign investors are fleeing the market.
Andrew Holland, head of proprietary trading at Merrill Lynch in Bombay, said: “This time last year the talk was of India decoupling from the troubles of the rest of the world economy. Now it's clear that India has its own problems. It has gone from hero to zero.”
The bad news has been unrelenting. The rupee has plunged amid fears that India's fiscal deficit is spiralling out of control. In response, the country's fragile coalition Government has made massive populist handouts in the run-up to a general election that must be held before May.
Fitch, the ratings agency, recently downgraded the outlook on India's sovereign debt, taking it only one step from junk status.
Goldman Sachs has just lowered its GDP growth forecast for 2008 to 7.5 per cent - a rude awakening for a nation that was gunning for double figures. Robert Prior-Wandesforde, the HSBC economist, said: “Just as many forecasters and markets were too optimistic in 2005-07, effectively running with the view that whatever China could do, India could do better, there are now some that are suggesting that it can do nothing right.”
(...) [artículo aquí]
Rhys Blakely
The Times, August 4, 2008
The rise of India's economy is often compared to the progress of an elephant - slow and plodding when compared with the dragon of China, but invested with a heavy sense of inevitability. In the past six months, however, the elephant has performed a disconcerting about-turn.
In January India appeared to be in excellent shape. Annual GDP growth was close to 9 per cent, corporate profitability had risen by 20 per cent in a year and the stock market had surged 50 per cent. The elephant was trundling along at full speed.
Seven months later, Bombay's benchmark Sensex index has lost 40 per cent of its value and foreign investors are fleeing the market.
Andrew Holland, head of proprietary trading at Merrill Lynch in Bombay, said: “This time last year the talk was of India decoupling from the troubles of the rest of the world economy. Now it's clear that India has its own problems. It has gone from hero to zero.”
The bad news has been unrelenting. The rupee has plunged amid fears that India's fiscal deficit is spiralling out of control. In response, the country's fragile coalition Government has made massive populist handouts in the run-up to a general election that must be held before May.
Fitch, the ratings agency, recently downgraded the outlook on India's sovereign debt, taking it only one step from junk status.
Goldman Sachs has just lowered its GDP growth forecast for 2008 to 7.5 per cent - a rude awakening for a nation that was gunning for double figures. Robert Prior-Wandesforde, the HSBC economist, said: “Just as many forecasters and markets were too optimistic in 2005-07, effectively running with the view that whatever China could do, India could do better, there are now some that are suggesting that it can do nothing right.”
(...) [artículo aquí]
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