Thursday 26 February 2009


RETURNING INDIA TO A HIGH GROWTH PATH

Arvind Panagariya

The Economic Times, February 26, 2009

Only a few months ago, many in the media had been arguing that the emerging market economies (EMEs) had now acquired a growth momentum of their own and were immune to the booms and busts in the developed countries. Less than six months into the financial crisis that originated in the United States, the “decoupling” thesis is biting the dust.

The crisis, which turned the ongoing economic slowdown in the United States into a full-blown recession, has been transmitted to the Asian EMEs at lightening speed. Triggered as recently as September 2008, it has led to a spectacular spiralling down of the GDP in many Asian countries.

And more integrated the country’s economy into the US economy, the more severe the impact. In South Korea, the GDP has fallen a whopping 21% in the last quarter of 2008. The loss in Singapore has been 17%. Taiwan has seen its industrial output decline by a gigantic 32% in 2008.

Even China, which is less dependent on the United States than these three countries, has seen its growth rate collapse to a negligible annualised rate of 2% in the last quarter of 2008. No longer can it be claimed that China stands apart from the rest of the human race in its ability to push ahead with growth under all circumstances.

Precisely how badly has India been impacted is not yet clear, however. The Central Statistical Organisation (CSO) will release the GDP data for the last quarter of 2008 only on February 27, 2009. The news on the export front is discouraging, however.

Since the beginning of the financial crisis, merchandise exports during each of the four months have declined relative to the corresponding month in the preceding year: 12.1% in October, 9.9% in November, 1.1% in December and 22% in January. But given India remains far less dependent on merchandise exports than its East-Asian counterparts, despite considerable opening up in recent years, the impact of the slowdown in exports on the GDP is likely to be more moderate.

(...) [artículo aquí]

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