FIVE THINGS WRONG WITH INDIA'S ECONOMY
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.
LOOMING FISCAL AND TRADE DEFICITS
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.
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