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 Posté le: Jeu Sep 26, 2013 5:16 pm Sujet du message: India’s double-deficit ridden economy continues to |
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India’s double-deficit ridden economy continues to get hit by domestic and external factors. The economy slowed down from 4.8 per cent year-on-year in the first quarter to 4.5 per cent in the quarter ending in June. Expectations were slightly higher.The slowdown came mostly from poor performances in the mining and manufacturing sectors: industrial production contracted by 2.2 per cent in June, its second consecutive fall,[url=http://www.michael-korshandbags-outlet.net]Michael Kors Handbags Outlet[/url],[url=http://www.michael-korshandbags-outlet.net]Michael Kors Handbags Outlet[/url], dragged by manufacturing which accounts for three quarters of total production. The decline has been taking place across the board, from capital to consumer goods. Domestic consumption has softened due to the erosion of purchasing power, as inflation creeps back up, and is not expected to recover soon as consumer confidence falters. The fragile recovery in India’s largest trade partner,[url=http://www.michael-korshandbags-outlet.net]Michael Kors Outlet[/url], the eurozone, has also been hurting the economy’s exports. The widening current account deficit, also due to higher oil prices,[url=http://www.michael-korshandbags-outlet.net]Michael Kors Outlet[/url], has had negative repercussions on investor confidence, discouraging foreign investment. The outflow of capital has been exacerbated of-late by the fears surrounding the timing of the US Fed’s QE3 tapering. This has led to massive losses in the value of the rupee, which has depreciated by 22 per cent so far this year.Real gross domestic product, or GDP, is a measure of the economic output or of the size of the economy,[url=http://www.michael-korshandbags-outlet.net]michael kors canada[/url], adjusted for inflation or deflation. It is the sum of the values of all final goods and services produced by that country or region over a given time period. Real GDP is a measure that holds prices constant by using a given year’s value (the base date) for all items and services. GDP can be measured in several ways. The Central Statistical Organisation of India, the government body responsible for national accounts data, publishes GDP by expenditure and sector output. The expenditure approach breaks down GDP into private consumption, government expenditure, fixed capital investments, exports and imports. Investment has been the engine behind India’s robust growth since 2003, and is essential given the vast amount of infrastructure needed. However growth in investment has been lacking in the past few years. Private consumption is also a major component of the services-driven country, making it a more domestic-oriented economy than the rest of Asia.The nation’s growth rate has been on a downward trend since mid-2011, and is expected to keep easing until at least the second half of next year. The sub-par performance in economic growth and the sharp depreciation in the rupee of-late puts India in a complex state of affairs, calling for government action. Since September of 2012,[url=http://www.michael-korshandbags-outlet.net]Michael Kors Handbags[/url], the government stepped up its efforts to bolster economic growth: it eased restrictions on foreign investments and recently approved infrastructure projects worth $28.4 billion in the oil, gas, power, road and railway industries. However,[url=http://www.michael-korshandbags-outlet.net]Michael Kors Handbags[/url], there are growing concerns about the country’s burgeoning fiscal deficit, especially after the endorsement of the Food Security Bill. The bill will provide subsidised food to almost two-thirds of the country’s population and is expected to cost the government about $4 billion per year. Consequently, the prime minister’s pledge to bring down the fiscal deficit from 5.2 per cent of GDP to 4.8 per cent in the current financial year is proving to be increasingly unrealistic. With the fiscal deficit projected to remain at elevated levels, the nation has become increasingly dependent on the central bank to cut rates to bolster the economy.However, further rate cuts are unlikely given that the rupee is still depreciating, hitting all-time lows. In fact, the central bank has gone on a tightening spree in a desperate attempt to prop up the currency. The combination of restrictive government spending in order to limit fiscal deficit to 4.8 per cent of GDP this year, and further tightening to stabilize the currency leaves a bleak outlook for growth. Upcoming elections in March of 2014 will be a crucial point in India’s economic prospects. We think that is unlikely that any unpopular structural reform could be approved. Growth is still unlikely to pick up in the medium term and is likely to recede to an average growth rate of 4.8 per cent year-on-year for the 2013-14 fiscal year.The writer is an economist from Asiya Investments,[url=http://www.michael-korshandbags-outlet.net]michael kors canada[/url], an investment firm specialising in emerging Asia investments. Print this story var google_adnum = 1; function google_ad_request_done(google_ads) {var s = '';var i;if (google_ads.length == 0) { return; }s+='
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