Economist magazine on India

Today’s Economist echoes the points I made in yesterday’s blog about the current account deficit, and in previous blogs about fiscal deficits and slowing growth. The story is titled “Turning Sour,” referring to the economy, but the final analysis of the reporter is not all that gloomy. The chart is quite illuminating: it shows the dramatic slowdown in industrial production. The interest rate chart makes the RBI response seem quite anemic. On the other hand, I was reminded of some older work by Vineet Virmani which showed that the RBI’s policy responses make more sense when inflation is measured by a “trimmed mean” index rather than the popular headline WPI. More on that later. cas677.gif

One Response to "Economist magazine on India"

  1. phaedrus   August 6, 2008 at 11:38 pm

    While there are worries about a repeat of 90s, few points to keep in mind -1. The industrial production numbers had been on the lower side in 2007 as well, but GDP growth for FY 08 was at around 9%2. India remains primarily driven by services (55% of GDP)3. The above trend GDP growth witnessed in the last few years should moderate to a sustainable level, providing some relief to the creaking infrastructure4. Corporate India’s productivity levels have improved and leverage is lower compared to the past.5. External position remains comfortable – strong forex reserves and relatively low external debt to GDP ratioGlobal energy prices remain the main issue for India – as it imports 75-80% of it oil requirements