INDIA’S ECONOMIC WOES CONTINUE
Even as markets rise, weak growth numbers and a steadily accumulating debt are a drag on India's economy.
The Diplomat, December 4, 2012
James Parker
The latest Indian economic data continues to paint a subdued picture. Third quarter GDP growth fell back to 5.3% year-on-year (YoY), the same level as in the first three months of the year, and lower than the 5.5% recorded in the second quarter. Despite this and the challenges of carrying out the necessary reforms, Indian markets ended November on a high.
Underlying this low (for India) figure, weak manufacturing expansion – at 0.8% YoY, and weak agricultural numbers – 1.2% YoY growth, were only partially offset by the main financial/business services sectors (Finance, Insurance, Real Estate and Business Services), which account for 55% of India’s total output, and grew by 9.4% on the previous year.
As covered previously on this blog, Indian monetary policy is facing a dilemma, with high inflation remaining a dangerous check on any attempt by the government to stimulate growth. Friday’s Consumer Price Index (CPI) for Industrial workers rose to 9.6% in October, up from 9.14% in September. Even as the Reserve Bank of India (RBI) faces this inflation/growth straitjacket, on the fiscal side a high budget deficit also constrains policy. India’s budget deficit is predicted to be 5.3% of GDP in the current year, slightly higher than the official target of 5.1%. The long term goal, announced by Finance Minister Palaniappan Chidambaram in late October, is for the deficit to hit 3% by 2017. This target does not sit well with any hopes for further fiscal stimulus to the economy.
(...) [article here]
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