03-12-2010, 08:14 AM
[url="http://www.heritage.org/Research/AsiaandthePacific/wm2830.cfm"]Is India's Economy Weakening?[/url]
Quote:The conventional wisdom concerning the Indian economy has two tenets: (1) India has weathered the financial crisis exceptionally well; and (2) India is still undergoing liberalizing reform. Both of those tenets, though, can reasonably be questioned.
Reported Indian GDP growth fell to 6.0 percent in the October-December quarter of 2009, lower than the 6.2 percent in the same quarter of 2008. By itself this decrease is not important, but it comes at a time of high inflation and a dangerously large budget deficit. Under such circumstances, 6 percent growth is not much of an accomplishment. More telling for the long term, this year's budget means the current Congress Party government has further cemented its legacy as reformers in name only.
America's ability to alter this legacy is limited. However, the emerging U.S.-India partnership requires each nation to be direct. Economic negotiations with India should be regarded in part as a means to encourage market reform.
Indian Growth in Context
Three years ago, an economy exhibiting 6 percent real growth, nearly 9 percent inflation, and a consolidated national budget deficit exceeding 12 percent of GDP would have been rightly deemed as heading for serious difficulties. The obvious response is that India should be judged in the context of the financial crisis. However, it is not clear that the economy has actually improved as the global crisis has eased.
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