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

Video On The Scene: In Ethiopia, 'Are You a Journalist?' Is a Loaded Question

VOA's Anita Powell describes the difficulties faced by reporters in fully conveying the story in a country where people are reticent to share their true opinions More

Nigerians Await New President With High Hopes

When pomp and circumstance of inauguration end in Abuja, Buhari will sit down to the hard task of governing Nigeria More

India's Restrictions on Several NGOs Raise Concerns

Political analysts link recent clampdown on advocacy groups to report last year that said foreign-funded NGO’s negatively impact economic development 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.
Expelled from Pakistan, Afghan Refugees Return to Increased Hardshipi
X
Ayesha Tanzeem
May 28, 2015 6:48 PM
Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Expelled from Pakistan, Afghan Refugees Return to Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video Floodwaters Recede in Houston, but Rain Continues

Many parts of Texas are recovering from one of the worst natural disasters to hit the southwestern state. Heavy rains on Monday and early Tuesday caused rivers to swell in eastern and central Texas, washing away homes and killing at least 13 people. As VOA’s Greg Flakus reports from Houston, floodwaters are receding slowly in the country's fourth-largest city, and there likely is to be more rain in the coming days.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.

VOA Blogs