News / Asia

India's Slowing Economy Unlikely to Stage Quick Recovery

A customer leaves a shoe store in Mumbai January 31, 2012.
A customer leaves a shoe store in Mumbai January 31, 2012.
Anjana Pasricha

Economists in India say the nation's economy is growing at its slowest pace in three years.  From New Delhi, Economic growth is not expected to pick up significant pace anytime soon. 

Government estimates have confirmed what economists have been saying for several months.  India’s economy will grow by 6.9 percent in the financial year that ends in March. That figure is sharply down from the 9 percent growth the government had forecast at the start of 2011.  It is also the slowest pace since the economy was hit by the 2008 global financial crisis.

At that time, India’s economy had staged a swift recovery.  But most economists say this time, that will not happen.

A. Prasanna, an economist at ICICI Securities in Mumbai, says global economic turbulence and domestic problems have contributed significantly to the slackening pace this time.  

“Investment demand has really slowed down in India because business sentiment has turned weak," explained Prasanna.  "On top of that we had the Reserve Bank hiking interest rates quite aggressively though the whole of last year to contain inflation, so the higher rates have had further dampening impact on investment.”

The government is being blamed for the reduction in investment demand.  It put pro-business policies on hold to deal with a series of corruption scandals and a lack of political consensus.

Moreover, its own finances are also not as healthy as they were in 2008.  Then, the government injected billions of dollars to boost consumer demand.  It cannot do this again because it is grappling with a high fiscal deficit.  

Economist Prasanna says all eyes are on the federal budget to be announced next month because the government’s response could be critical in determining the pace of recovery.

“If the government does send out a signal that they will work hard to bring down the deficit, that and take up an opportunity to proceed with some reforms in key sectors, it will help in bringing down interest rates," Prasanna said.  "It will also help in improving business sentiment.  That may not help much in the current year, but it's important down the line.”

However, there is some cause for cheer.  After losing 25 percent of their value last year, stock markets are recovering as more foreign funds begin to flow in.  The local currency, the rupee, has also recovered some value after falling to an all time low against the dollar last year.  

But economists caution that the government cannot take high growth for granted as it has done for years.  They say it will have to work harder to give fresh momentum to the economy. 

Most forecasts put growth at around 7 percent in the coming year.  That is high compared to developed countries, but not high enough for an emerging economy that hopes to be one of the engines of a global economic recovery this decade.

You May Like

India PM Modi's party distances itself from religious conversions

BJP under fire for being slow to rein in hardline affiliate groups allegedly trying to promote a Hindu-dominant agenda by luring Muslims and Christians to convert to Hinduism More

Anti-Whaling Group Found in Contempt of Court

Radical environmentalists who threw acid and smoke bombs at Japanese whalers in the waters off Antarctica continue their campaign to disrupt Japan's annual whale hunt More

UN's Ban Urges End to Discrimination Against Ebola Workers

Ban was speaking in Guinea on the second day of a whistle-stop tour aimed at thanking healthcare workers of the countries at the heart of the epidemic More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid