Wednesday, 30 May 2012



Kourosh Ziabari

Foreign Policy Journal, May 31, 2012

Today, most international relations analysts and experts consider China as the world’s second political and economic power after the United States. China came second in the International Monetary Fund’s 2011 ranking of countries by GDP (nominal) and is one of the main producers of agricultural products and industrial commodities and the world’s number one exporter. China is also the United States’ first trading partner, and at the same time, it’s major economic and political competitor.

The politics of China are thoroughly complicated. National interests define the limits of China’s foreign policy while some traces of opposition to the Western world in general, and the United States in particular, can always be found in China’s attitude toward international affairs.

In order to learn more about the intricacies of China’s predominantly growing economy, its foreign policy, and its relations with the United States and the Middle Eastern nations, I’ve interviewed Zhiqun Zhu, assistant professor of international relations at the Bucknell University, who specializes in Chinese politics and foreign policy and East Asian international relations.

Prof. Zhu is the author of “U.S.-China Relations in the 21st Century” and “China’s New Diplomacy.”

(...) [artículo aquí]

Tuesday, 29 May 2012


Chosun Ilbo


The Chosun Ilbo, May 30, 2012

A reunified Korea would be capable of joining a select group of countries with a per-capita income of over US$30,000 and a population of 80 million, some pundits believe.

South Korea's population is expected to reach 50 million next month amid a per-capita income of nearly $20,000. Reunification with North Korea would bring the population to about 72 million.

Only the U.S., Japan and Germany have managed a per-capita income of over $30,000 with populations over 80 million. The rest are either populous but poorer or rich but smaller.

To reach that level, Korea would have to rely far more than it does now on domestic consumption and reduce its dependence on exports. Domestic consumption accounts for 70 to 80 percent of the U.S. and Japanese economies. "If the economy gets bigger due to a growth in the population, it would become less vulnerable to external shocks despite trials and errors as it pursues innovative steps," said Kim Hyung-joo at the LG Economic Research Institute.

(...) [artículo aquí]




Nick Edwards

Reuters, May 29, 2012

XI'AN, China (Reuters) - A gleaming new $1.4 billion airport extension, a $5.2 billion bullet train and Samsung's planned $7 billion electronics plant, touted as the largest single high-tech foreign investment in China, are sure signs of economic intent in ancient Xi'an.

Along with a $1.4 billion subway, a crane-cluttered skyline and rapidly rising tower blocks shrouded in industrial smog that cloaks the 3,000-year old former dynastic capital, they show that fixed asset investment remains the main route to growth for China - trod for three decades and likely for decades to come.

For all of China's talk of economic rebalancing to shield it from internal and external risks, the only real re-orientation in the medium term is geographic - shifting infrastructure spending west to replicate rewards reaped by 30 years of coastal development.

That is likely to stoke concerns already voiced by the International Monetary Fund about China's unprecedented rate of investment spending and confound investor expectations that rebalancing would be a swifter shift towards the consumption-driven growth of developed economies - not 20 more years of inland infrastructure creation.

"There are experiments everywhere in China. Some good points emerge and the best points are what the centre tries to identify and encourages others to learn from," Zhang Wei Wei, a leading scholar of China's development model who was translator to its architect - Deng Xiaoping - told Reuters.

China's rise, in Zhang's analysis, depends on a conscious effort by Beijing to perfect an urban development model that eases rural poverty and cements power in the capital.

It implies fixed asset investment on a scale as enormous as that which has generated around half of China's growth in the last decade - when it amassed a foreign reserves fortune of $3.3 trillion, became the world's second-largest economy, the biggest exporter and the most important driver of global growth.

Indeed, intensive urbanisation is the only way Xi'an and dozens of similar cities can grow fast enough for the Communist Party to make good on pledges to raise incomes for the poor and achieve social stability, thereby justifying its grip on power.

During the 2005-2010 five-year plan, average annual urban income in Xi'an roughly doubled to 22,244 yuan. The plan is to double it again by 2015. But that still leaves wages way behind Shanghai's 71,874 yuan average - China's highest.

(...) [artículo aquí]

Monday, 28 May 2012




ABC (Auatralia), May 28, 2012

EMILY BOURKE: The Reserve Bank has acknowledged China poses a potential economic threat to Australia.

Governor Glenn Stevens says China's economic data has been "materially slower".

The comments came as the governor addressed the Australian Payments Clearing Association.

Finance reporter David Taylor has been listening to the speech and he joins me now.

David, just how much of a threat did the governor say China poses to the Australian economy?

DAVID TAYLOR: Well certainly some threat Emily. The governor has made it clear that he's been watching economic developments in Europe and China, and both provide some risks to the Australian economy but the extent of those risks are not exactly known, even from the Reserve Bank.

And the governor pointed to two main concerns - Europe's debt crisis and China's property bubble. And we know that China has been slowing. If we're looking specifically at China, a few years ago they were, GDP - that's their economic growth - was around 10 per cent and now it's something in the order of 8 per cent.

(...) [artículo aquí]

Sunday, 27 May 2012


Deccan Chronicle


Deccan Chronicle, May 27, 2012

Finance Minister Pranab Mukherjee has stressed on the need for the Asian economies to collectively think on channels of engagement with each other that create synergies directed at addressing common challenges.

Mr Mukherjee was addressing two-day national seminar on “21st Century as the Asian Century: Role of India and China” organised by Manipal Centre for Asian Studies on Saturday.

“Even in existing multilateral for a including the G-20 and IMF we should aim to coordinate more in areas where there is significant collective gain to be achieved, he said.

“A crisis of the magnitude that we are witnessing compels us to take notice of our deficiencies, suitably reorient policies and redefine priorities. While economic challenges faced by each Asian country are unique and there is no one-size-fits-all future trajectory of economic development, there is worldwide recognition of the fact that most Asian economies, including India are poised to attain sustained long-term growth, notwithstanding some short-term policy challenges,” he said.

(...) [artículo aquí]

Friday, 25 May 2012



David Pilling Spectator, May 25, 2012

April was a truly gripping month for Chinese politics. Bo Xilai, the nearest thing in China to a politician running for national office, was purged with a brutality reminiscent of the Mao era he had so enthusiastically invoked. But while the country, and the world, was spellbound by the unfolding political drama, something strange was happening to the economy – nothing at all.

Economic activity in China appears to be running into the ground. In the first quarter, growth slowed to 8.1 per cent as measured officially, and to about seven per cent on an annualised basis. But in April, things took a sudden turn for the worse. Import growth stalled and this month Chinese customers sought to defer, or even default on, contracts for iron ore and thermal coal. That suggests all is not well in Chinese steel plants, on its building sites or in its factories. Other economic proxies, from electricity output to rail cargo and bank loans, also suggest a sudden screeching of economic breaks. Even official numbers – rightly held in much scepticism – have markedly slowed. Industrial production, fixed-asset investment and retail sales have disappointed one after the other.

(…) [artículo aquí]

Wednesday, 23 May 2012




Pete Sweeney and Langi Chiang

Reuters, May 23, 2012

SHANGHAI/BEIJING (Reuters) - China signaled on Wednesday it wanted to boost private investment in its energy sector as Beijing makes its most determined push since joining the World Trade Organisation to reduce the role of the state sector in the economy.

Many analysts say China must allow more private investment if it is to unlock new sources of economic growth, which the World Bank said would slow in 2012 to its weakest pace in 13 years.

"Downward economic pressure is increasing," Premier Wen Jiabao said at a regular cabinet meeting, where he underscored previous comments that China would increase measures to support growth. His remarks were reported on the government's website.

Beijing intends to fast-track infrastructure investment to combat the slowdown, state media reported this week.

In the latest measures, the government will publish detailed guidelines aimed at encouraging private investment across industries, with special focus on heavily state-controlled electricity, oil and natural gas sectors, the official Xinhua news agency said.

"It's a fantastic aspiration, but it's very complicated as it involves a lot of things," said Stephen Green, chief China economist at Standard Chartered Bank in Hong Kong.

"It's impossible to quantify until we see details, but it could probably take years to see any impact," he said.

The government has already said it would allow private investment in the vast railway sector, which is struggling with mounting debts and a corruption scandal while attempting to resolve infrastructure bottlenecks.

Last month, sources told Reuters that China's reformers sense an opportunity to push through a series of changes before President Hu Jintao and Premier Wen step down early next year.

That view could also be partly behind the latest steps to allow more private involvement in state-controlled areas.

(...) [artículo aquí]

Sunday, 20 May 2012




Patrick Chovanec

SeekingAlpha, May 20, 2012

In my debate with Andrew Batson in The Guardian in March, I noted that:

There really are two related but distinct things people have in mind when they talk about a "hard landing" for China. The first is a rapid deceleration of GDP growth – below, say, 7%. The second is some kind of financial crisis. I think we're already seeing some signs of the first, and the second is a bigger risk than most people appreciate.

In my last several posts, I've focused on the former — the slowdown in China's GDP growth. I want to switch gears here for a moment and call attention to a rather alarming story involving the latter — the risk of financial instability — which somehow slipped under most people's radar screens.

In early April, Caixin magazine ran an article titled "Fool's Gold Behind Beijing Loan Guarantees", which documented the silent implosion of Zhongdan Investment Credit Guarantee Co. Ltd., based in China's capital. "What's a credit guarantee company?" you might ask — and ask you should, because these companies and the risks they potentially pose are one of the least understood aspects of China's "shadow banking" system. If the risky trust products and wealth funds that Caixin documented last July are China's equivalent to CDOs, then credit guarantee companies are China's version of AIG.

As I understand it, credit guarantee companies were originally created to help Small and Medium Enterprises (SMEs) get access to bank loans. State-run banks are often reluctant to lend to private companies that do not have the hard assets (such as land) or implicit government backing that State-Owned Enterprises (SOEs) enjoy. Local governments encouraged the formation of a new kind of financial entity, which would charge prospective borrowers a fee and, in exchange, serve as a guarantor to the bank, pledging to pay for any losses in the event of a default. Having transferred the risk onto someone else's shoulders, the bank could rest easy and issue the loan (which it otherwise would have been reluctant to make). In effect, the "credit guarantee" company had sold insurance — otherwise known as a credit default swap (CDS) — to the bank for a risky loan, with the borrower forking over the premium.

(...) [artículo aquí]

Saturday, 19 May 2012


Economic Times logo OK


The Economic Times, May 19, 2012

Abhishek Goenka, founder CEO of India Forex Advisors, shares his views on the current state of the Indian economy and possible solutions.

After the 1991 economic crisis, India emerged as one of the fastest growing economies in the world. It recorded the highest growth rate in mid-2000s. The growth was led primarily due to a huge increase in the size of the middle class consumer, a large labor force and considerable foreign investments.

The process of LPG (liberalization, privatization and globalization) moved the country towards the path of growth, making it an attractive destination for investors around the globe. After the 2008 recession, the world economy was badly hit, leading to the global economy slowdown.

Our growth also slipped to 6.8 percent in 2008-09, but recovered again to 7.4 percent in 2009-10. The fiscal deficit was seen rising from 5.9 percent to 6.5 percent in the same duration. In 2003, Goldman Sachs predicted that India's GDP would overtake France's and Italy's by 2020 and Germany's, Russia's, the UK's by 2025, making it the third largest economy of the world after the US and China.

Can the same be said in 2012? It's quite difficult, but not impossible. The current account had always recorded a deficit. Growing oil import bills were the main reason behind the large current account deficit.

By 2011, India's public debt stood at 62.43 percent of GDP -- the highest among emerging economies. In 2011-12, our foreign trade increased by 30.6 percent to USD 792.3 billion, which consists of 38.33 percent of exports and almost 61.67 percent of imports. As of June 2011, exports and imports both grew with monthly exports reaching $25.9 billion for the month of May 2011 and monthly imports reaching $40.9 billion for the same month. It's clear from the above description that the entire problem that we talk about trade deficit, fiscal deficit, and sticky inflation was created over a period of time, the consequence of which has to be paid today in terms of slowing economic growth.

(...) [artículo aquí]

Friday, 18 May 2012


Reuters DEF


Reuters, May 18, 2012

BEIJING (Reuters) - China's annual economic growth could slow to 7.5 percent in the second quarter, largely due to curbs on the property sector and headwinds from external demand, the State Information Center, a government think-tank, said in a report published on Friday.

If the GDP forecast is accurate, growth in the second three months of 2012 would be the slowest since the first quarter of 2009, when the global economy was in the grip of the worst financial crisis since the Great Depression.

The forecast is in line with the government's official 2012 growth target of 7.5 percent which was set in March.

But a fall below 8 percent would worry many investors who regard that rate of growth as the minimum needed to ensure sufficient job creation for China's hundreds of millions of mainly poorly paid rural migrant workers.

The consensus estimate in the latest benchmark Reuters poll shows that private sector economists expect China's growth to ease to 7.9 percent in Q2 from an 8.1 percent annual rate in Q1. They forecast full year growth of 8.2 percent.

(...) [artículo aquí]

Thursday, 17 May 2012


Bloomber - BWok


Keiko Ujikane and Shamim Adam

Bloomberg Business Week, May 17, 2012

Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand.

Gross domestic product rose an annualized 4.1 percent from the final three months of 2011, exceeding all but seven of 27 estimates in a Bloomberg News survey of economists, a Cabinet Office report showed today in Tokyo. Singapore also reported a rebound in growth last quarter, while warning about the risk of a disorderly European debt default.

Policy makers across Asia are girding for the impact of any Greek exit from the euro region that could roil the global financial system, with Malaysia’s central bank chief seeing possible “catastrophic” consequences for Europe. South Korea said it has enough currency reserves to weather the storm, while in Japan, pressure may rise to step up monetary stimulus and act against what the government calls “excessive” currency moves.

“Japan is on a steady recovery path but this high growth probably won’t continue,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “The Bank of Japan probably wants to wait and see the effect of their monetary easing but as economic data will show more moderate growth going forward, they are likely to face an increase in political pressure for more actions.”

(...) [artículo aquí]

Wednesday, 16 May 2012


The Korea Times


Minxin Pei

The Korea Times, May 16, 2012

CLAREMONT, Calif. ― Political scandals sometimes perform a valuable function in cleansing governments. They destroy the political careers of individuals of dubious character. More importantly, they can debunk political myths central to the legitimacy of some regimes.

That appears to be the case with the Bo Xilai affair in China. One enduring political myth that went down with Bo, the former Communist Party boss of Chongqing municipality, is the notion that the Party’s rule is based on meritocracy.

In many ways, Bo personified the Chinese concept of “meritocracy” ― well-educated, intelligent, sophisticated, and charming (mainly to Western executives). But, after his fall, a very different picture emerged. Aside from his alleged involvement in assorted crimes, Bo was said to be a ruthless apparatchik, endowed with an outsize ego but no real talent. His record as a local administrator was mediocre.
Bo’s rise to power owed much to his pedigree (his father was a vice premier), his political patrons, and his manipulation of the rules of the game. For example, visitors to Chongqing marvel at the soaring skyscrapers and modern infrastructure built during Bo’s tenure there. But do they know that Bo’s administration borrowed the equivalent of more than 50 percent of local GDP to finance the construction binge, and that a large portion of the debt will go unpaid?

(…) [artículo aquí]

Tuesday, 15 May 2012


Financial Standard


Financial Standard, May 15, 2012

Despite growing fears about a decline in manufacturing, Asia is underpinned by resilient domestic demand and strong growth in intra-region trade, according to Fidelity.

Asian economies are less dependent on OECD countries than in the past, said David Urquhart, portfolio manager of the fidelity Asia fund.

"Today, Asia contributes more to world GDP growth than the US and the EU does combined," he said.

While there has been concern that consumption rates in Asian economies have not caught up enough to meet a decline in manufacturing, Urquhart said that the region has entered into a sweet spot for strong growth and consumption.

"On the economic side, when countries are poor, their savings rates are high. however once GDP per capita rises into the range between us$3,000 to us$10,000, savings rates decline and consumption becomes a larger portion of GDP," said Urquhart.

"In the past decade, for example, we saw china's GDP grow from US$1,000 to US$4,000, or expand four times over.

"Over the same period, we saw car sales in china grow from one million a year to 17 million vehicles a year, or by 17 times."

An ailing us economy and the dismal state of the EU have forced Asian markets to focus more on intra-region trade.

(...) [artículo aquí]

Monday, 14 May 2012




Unni Krishnan

Bloomberg, May 14, 2012

Indian inflation unexpectedly accelerated in April, crimping the central bank’s scope to extend interest-rate cuts and bolster economic growth.

The benchmark wholesale-price index rose 7.23 percent from a year earlier, after climbing 6.89 percent in March, the Ministry of Commerce and Industry said in a statement in New Delhi today. The median of 32 estimates in a Bloomberg News survey was for a 6.67 percent gain.

Reserve Bank of India Governor Duvvuri Subbarao signaled last month that inflation might limit the room for further cuts after he slashed the benchmark rate by half a percentage point, flagging price risks from the fiscal deficit, energy costs and a weaker rupee. Pressure on Asian nations to support growth has resurged as Greece’s political turmoil threatens to deepen the European debt crisis and exports falter from Taiwan to Malaysia, prompting China to cut banks’ reserve requirements on May 12.

“The inflation number underscores that the room to ease monetary policy is quite limited because there are still upside risks to inflation,” said Leif Eskesen, Singapore-based chief economist for India and Southeast Asia at HSBC Holdings Plc.“There isn’t a lot of spare capacity in the economy because growth has slowed on the back of policy paralysis, lack of structural reforms and therefore it makes inflation a structural problem rather than a cyclical one.”

The central bank lowered the repurchase rate on April 17 for the first time since 2009, by 50 basis points to 8 percent. A report last week showed Indian industrial production unexpectedly contracted in March as weaker domestic demand and tumbling exports hurt the economy.

(...) [artículo aquí]

Saturday, 12 May 2012




Clifford Coonan

The Irish Times, May 12, 2012

LOWER THAN expected industrial output data in China, ebbing retail sales and weak growth in fixed asset investment, coming on top of weak trade data earlier in the week, combined to paint a gloomy picture for the world’s second largest economy.

“This is not good,” was the stark headline on UBS Bank’s weekly economic focus note, in which China strategist Wang Tao revised her overall GDP growth forecast for this year to 8.2 per cent from 8.5 per cent.

Industrial production for April slowed to 9.3 per cent year-on-year, its slowest annual pace since April 2009, on the back of decelerating exports and property investment, while fixed asset investment growth dipped to its lowest in almost a decade.

“The government’s effort on social housing and some infrastructure projects have so far not been sufficient to stop the overall economic slowdown,” wrote Ms Wang.

With export growth still in decline and downside risk in Europe and the global economy remaining, UBS believes the government may want to ease credit and fiscal policy further to support growth.

The weak growth in fixed asset investment indicated that the impact of a prolonged credit crunch in China’s property sector, and of flagging demand from export markets, was more severe than first thought.

New loans in April were well below what most observers had expected, helping to explain continued tight conditions for businesses and developers despite the gentle easing espoused by Beijing.

“Chinese trade and activity data for April show a weak start to Q2, while inflation data show a further easing in price pressures,” said Brian Jackson, senior emerging markets strategist at RBC Capital Markets in Hong Kong.

(...) [artículo aquí]

Friday, 11 May 2012


Business Day


Weaker exports than expected and stalling headline import growth signal that government spending is the crucial factor keeping the economy moving

Allen Wang and Nick Edwards (Reuters)

Business Day, May 11, 2012

China risks a fresh downturn in demand for goods from its huge factory sector, with weaker exports than expected and stalling headline import growth signalling that government spending is the crucial factor keeping the economy moving.

Annual growth in imports last month was just 0,3%, far below forecasts of an 11% increase, while exports managed growth of just 4,9% versus expectations of 8,5%, customs data released yesterday showed.

"We know the external climate is not particularly conducive to strong export growth and digging into the data you can see primarily it is a euro-zone story, which is to be expected," Alistair Thornton, China economist at IHS Global Insight in Beijing, said yesterday.

"But the headline number on import growth is less expected and more worrying. It does point to a real weakness in the domestic economy and shows that we have not yet turned the corner into a sustained recovery."

The risks to China’s factory-focused economy of weakness in private sector final demand were underscored by a drop-off in shipments from Asian economies that feed China’s export-oriented assembly lines, while robust imports from Australia and solid annual volume growth in raw material imports indicate that state-led infrastructure spending underpins economic activity.

(...) [artículo aquí]

Wednesday, 9 May 2012


China Daily


Deloitte poll reveals positive outlook despite concerns of slower growth

Wang Xiaotian

China Daily, May 9, 2012

Multinational executives remain upbeat about China's business environment and are not allowing concerns over an economic slowdown to dampen their enthusiasm for investing in the country.

John Rice, vice-chairman of GE and president of Global Growth and Operations, told China Daily that he is very bullish about China's long-term prospects and GE's business in the country, because infrastructure projects remain a top priority, although the GDP growth rate will be lower than forecast last year.

"Although in any quarter you could see a challenge in the business, in the long run we believe China will be the world's largest economy, making it a place where companies have to take a long-term view."

Rice predicted GE's China business will grow by more than 15 percent this year, with each segment expanding at two to three times the GDP growth rate.

GE's revenue in China last year was $5.7 billion. Industrial segments contributed $4.9 billion, accounting for 9 percent of GE's global industrial revenue.

"The Chinese market is one of the most important markets that we have in the world. It's important because of the size of the market, but also because of the thought leadership that takes place here," he said.

Rice's remarks came after inbound investment to China dropped in March for the fifth consecutive month

Foreign direct investment fell 6.1 percent year-on-year to $11.76 billion in March, marking the longest decline since the onset of the global financial crisis.

(...) [artículo aquí]

Tuesday, 8 May 2012


THe China Post


Stella Dawson and Nick Edwards

The China Post, May 8, 2012

Reuters -- With the United States struggling through a soft patch and Europe battling recession, China may come to the rescue by demonstrating a resilience that would provide comfort in a sea of economic uncertainty.

China, the world's second largest economy, is looking ever more vital to maintaining global economic momentum, and a raft of data to be released this week is expected to provide fresh evidence that its economy bottomed in the first quarter and is starting a gradual turn upwards.

China posted its weakest growth in nearly three years in the first quarter, with gross domestic product expanding 8.1 percent. The slowdown in growth coincided with deteriorating economies in the eurozone and the United States, China's two largest trading partners.

That combination stoked concern that China, too, could weaken, frustrating a shift away from export-driven growth toward domestic consumption, which economists view as essential to putting the global economy back on a solid growth path.

China's growth has from China is even more important after mixed data from the United States in recent weeks, highlighted by a disappointing jobs report for April. Job growth slowed to 115,000, the third straight month of deceleration.

(...) [artículo aquí]

Thursday, 3 May 2012


The China Post


Elaine Kurtenbach, AP

The China Post, May 3, 2012

SHANGHAI -- Manufacturing surveys released this week provided mixed signals over the state of China's economy.

A survey released Wednesday showed manufacturing contracted in April for the sixth straight month, though the rate of deterioration had slowed.

Adjusted for seasonal conditions, HSBC's Purchasing Managers' Index, or PMI, for April was 49.3, up from 48.3 in April. The index has remained below 50 — the level indicating expansion, since October.
Companies also reduced jobs, at the sharpest rate in 37 months, HSBC said.

A day earlier, the state-affiliated China Federation of Logistics and Purchasing said its PMI, rose 0.2 percentage points to 53.3 percent in April, up from March's 53.1 and February's 51 — the fifth straight month of expansion.

(...) [artículo aquí]

Wednesday, 2 May 2012


The Jakarta Globe


Jean-Pierre Lehmann

The Jakarta Globe, May 2, 2012

As Europe dithers and the United States nervously watches its unemployment rate, a China-led Asian rise is accepted as the new reality. Less noted is the anomaly of an Asia increasingly integrated with the Chinese economy and militarily more reliant on the United States.

At a retreat on Hayman Island, Queensland, for Australian CEOs, a security expert noted that this was the first time in Australia’s history that its major economic partner was not concurrently a major strategic partner — initially the United Kingdom followed by the United States.

China has become for Australia — as it has for many nations in the Asia Pacific and around the world, especially those engaged in commodity exports — its key engine of growth. Yet Australia has been one of the United States’ closest strategic and military allies from World War II to Korea to Vietnam and Iraq. The planned stationing of 2,500 US troops in Darwin, reflecting the Obama administration’s tilt to the Pacific, is meant to consolidate these ties. The United States and China are not belligerent, yet a rivalry is growing. Being between the two is uncomfortable, to say the least.

(...) [artículo aquí]

Tuesday, 1 May 2012


BBC News


Alam Srinivas

BBC News, May 1, 2012


After several official predictions that India would grow by 7-8% in 2011-12, the finance minister finally admitted in his Budget 2012 speech that the growth would be 6.9%.

The manufacturing sector is expected to grow just 3.9%

The actual figure may be lower at 6.5%, thanks to the statistical error in sugar production, which dragged down January's industrial production growth figure from 6.8% to 1.1%.

Although ratings agency Standard and Poor's estimate for 2012-13 is 5% or above, Indian economists feel they won't be surprised if the economy grows by just 4%.

"If things remain the way they are, in terms of policy decisions, investments and sentiments, I would go to the extent that the figure may be 3%," says a senior economist with a leading business association.


Wholesale price inflation, which is under 7%, could increase to 9-10% over the next few months.

Food inflation is still high at double-digit levels, and any hike in fuel (petrol and diesel) prices in the near future will spur inflation.

A combination of low growth and high inflation, or near-stagflation, would be India's worst economic nightmare come true.


In 2011-12, the fiscal deficit zoomed from a projected 4.6% of GDP to 5.9%. Although Budget 2012 predicted it would come down to 5.1% in 2012-13, most economists remain sceptical.

(...) [artículo aquí]