India's slowing growth??

This blog post is about this non sense article in Business week about India's slowing growth and its attempt to find reasons.

http://www.businessweek.com/globalbiz/content/jul2008/gb2008071_743900.htm

Lets try to analyze point by point what the author tries to portray are the reasons for the slowdown -

Much of the crisis India faces today could have been avoided by skillful planning. India imports 75% of its oil to meet demand, which have grown exponentially as its economy expands. The government also subsidizes 60% of the price of such fuels as diesel. In 2007, when inflation was a low 3%, economists such as Standard & Poor's Subir Gokarn urged New Delhi to start cutting subsidies. Instead, the populist ruling Congress government spent $25 billion on waiving loans made to farmers and hiking bureaucrats' salaries.

The primary reason for slowdown in growth being the spike in Oil imports. If the Government has reduced subsidies on oil an year earlier as suggested by S&P, it would have been disastrous and we would have seen the slowdown an year earlier. This only shows how stupid are the Standard & Poor economic guru's sitting at Hong Kong or New york without having an idea of what India is and how Indian people are and what are the economic fundamentals of India. There is no magic wand on the Global oil shortage, atleast for the time being. If you can think and plan a strategy, may be it will take another 10 to 20 yrs to lessen the dependance but nothing can be done at the present unless you can rein in the speculators and/or the OPEC. Standard & Poor should be better advised to give economic advice to George Bush and / or better concentrate on its rating philosophy or investigate on why its so called AAA rated Mortage securities in the US went bust within days and led to the collapse of the entire financial market in the US and across the world!!

Waiving farm loans leading to Slowdown?? what nonsense? waiving loans can atmost affect only government finances and deficit and if its able to manage alternate sources of additional revenue then it shouldnt matter. On the other hand it could even fuel Agricultural growth if farmers benefit out of this.

Again, raising salaries contributing to slowdown??crap..

those expenditures, plus an additional $25 billion on upcoming fertilizer subsidies, is adding $100 billion a year—or 10% of India's gross domestic product, or equivalent to the country's entire collection of income taxes—to the national bill. This at a time when India needs urgently to spend $500 billion on new infrastructure and more on upgrading education and health-care facilities

Yes, spending is required in infrastructure. But these requirements are nothing new or things that have come up suddenly from heavens. These are being in the wish list for last 10 yrs and inspite of it the growth has peaked at 9%. Ofcourse urgent spending in infrastructure is required to sustain this growth and push it ahead. But non action is not the reason for slowdown. Slowdown is due to inflation contributed by Crude oil imports. It will take couple of years to see the impact of infrastructure bottlenecks to reflect in the Economic growth.

A plan to build 30 Special Economic Zones is virtually suspended because New Delhi has not sorted out how to acquire the necessary land

Non action in SEZ didnt contribute to slowdown. Because the growth was not dependant on whether SEZ would be setup in the first place. Ofcourse this factor would be important to sustain and enable to reach the next level of attaining 10% and beyond but those are not reasons which contributed to current slowdown.

A June 16 report by Goldman Sachs' (GS) Jim O'Neill and Tushar Poddar, Ten Things for India to Achieve Its 2050 Potential, is a grim reminder that India has fallen to the bottom of the four BRIC nations (Brazil, Russia, India, and China) in its growth scores, due largely to government inertia.

Yes, government inaction is there for all to see and its common across the government - whichever party that is in power. It doesnt need a Goldman Sachs report. Anybody who has an iota of knowledge about India would know of these.

The report states that India's rice yields are a third those of China and half of Vietnam's. While 60% of the country's labor force is employed in agriculture, farming contributes less than 1% to overall growth

Increase in rice yields and all other food grains is the lowest in India is well known. But to achieve this in a Country like India would take decades to see actual result. If you start now, it will take a another decade to see real impact. Probably Goldman Sachs didnt know of these 10yrs before. Need for a second green revolution is precisely to achieve this and its been in public discussion for last five years. Probably the author didnt hear about it when Dr M S Swaminathan talked about it!

Already this year, foreigners have taken $5.5 billion out of the market, compared with the $19 billion they invested last year

Foreigners who have taken out $5.5B out of Indian market are those who are speculative investors who had invested in the stock market. These are pure investors who have taken out when the market started going down. These money is not in anyway connected to the Growth of the economy or slowdown. These are hot money or flight capitals which keep flying from country to country looking for short term returns. Its not as though any Foreign investment in Manufacturing, Industrial, financial, infra or IT sector which have been taken out. On the contrary the investment in these areas are growing because of the rapid slowdown in their own home markets!!

By reading such stupid writeups. I'm getting confidence that I too can become a journalist and would do a better job without depending on S&P writeups or Goldman sachs report or Moodys advisories!!...

I guess no brains Journalists are permeating all across the media spectrum!! Thought this was confined to only Indian Media. But ofcourse the article is written by an Indian, a product of Indian media. So what better can you expect?