Indian economic crisis

Escrito el 5 julio 2008 por Rafael Pampillón en Economía Mundial

The Indian economy will be put under pressure in 2008 tax year (March 2008 – April 2009) as a consequence of the world economic crisis. Its growth rate of 9% of recent years will suffer from the negative impact of American deceleration. Indeed, the Asian Development Bank has anticipated that the growth of the GDP for the 2007 tax year (which ended in March 2008) will be 8.7%, almost one percentage point down on the figure for the previous year. The country is also facing other challenges, such as pressure from inflation, which may lead the Indian monetary authorities to increase interest rates. This would increase capital cost and have a negative effect on trade and credit for enterprise all over the country. In short, India remains vulnerable to economic cycles. Consequently, some analysts suggest that the GDP may grow by only 7% in 2009. And that would be a problem, since the Indian economy needs to grow at 9% or 10% for a few years to reduce its poverty levels.

The boost provided by the reforms that were implemented in 1991 is probably coming to an end and it will be necessary to implement a new economic policy that adds flexibility to the labour market and improves the country’s struggling infrastructures. The potential is there; it simply has to be exploited with the appropriate economic policies. Forecasts for growth for the main emerging economies for the period 2007-2050, India is the world economy that will enjoy the highest growth, with a forecasted yearly average growth rate of 8.5%.


Fernando Peral 7 julio 2008 - 09:45

No doubt that all emerging economies will be affected by the dramatic slodown of consumption in the US and EU markets, but India seems to be in the eve of structural changes that might strenghthen its economic foundations in the global context. The main matter pending is that of the extension of self-financed safety nets for a growing proportion of the population. If India succeeds in this, it might well become a major player at the outcome of the financial crisis.

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