In recent news, the Indian government has tightened the economy again to try and control inflation that has hit more than 9% recently. This week was the 10th interest rate hike of the past 16 months. Businesses are concerned the policies could hurt growth and new investments, and think that some reforms such as in infrastructure, banking, and the fuel sector are the only way to fix the problems. It seems that India's economy has been losing a little bit of steam in the last year.
This article touches on some of the problems the Indian economy faces. In addition to infrastructure problems discussed last week, it is also constrained by corruption, red tape, and many controls. Also it faces $230 billion in debt, much less than the U.S. but still significant to warrant aid and borrowing. According to the economist, it is obvious that India's growth comes from private companies and a strong workforce, not from government direction like in China. It is a certain type of democracy that has enabled the freedom for growth but has done little to support it. Often the burden of providing clean water, backup electricity and transportation for workers falls on the individual corporations. Because of the governmental problems, China will continue to outstrip India in the global market, but India will be strong through knowledge based products (such as software and technology) especially as those things grow in importance.
"India's surprising economic miracle." The Economist. Sep. 30th, 2010.
Panchal, Salil. "Busines rounds on Indian Government over economy." <http://www.google.com/hostednews/afp/article/ALeqM5j3xPWBIaKsZKT8LtIxO0N1LE1Jgg?docId=CNG.69ead26989f7f2ebf65544104f3b136c.6a1>
Even with the recent "loss of steam", India is a major force in our global market. If they can get their standard of living in check, they can shift from developing country- to developed country in no time.
ReplyDeleteIndia's economy sounds like Romania's, except bigger and maybe slightly more stable. Romania has also had major problems with government corruption, inflation, and debt, but India's is higher. Hopefully, the citizens and the government of India will find a way to stabilize their economy soon because they play such a big role in the global market, including the U.S.
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