Sustainability of India s GDP growth rate

Abstract

Past: India is the second fastest emerging economy after China, growing at over 9% per year. Investments and consumption driving the growth of the economy, along with liberal fiscal policies, including lower interest rates and low inflation.? IIP or the Industrial Index of Production at an unprecedented height, industries growing due to spurt in investments, and lower Real Interest rates. Present: Inflation is touching newer heights, and the growth estimates have been pegged atsub-8% levels, along with downgrading of India by various agencies.? The IIP is now plummeting, along with lower capital goods index, which is a surrogate for Investment demand.? Higher Interest rates and tighter monetary policy in the economy to curtail inflation. RBI ready to give up growth in order to stop inflation.? Large amounts of off-budget subsidies and grants, along with Oil prices and unfavourable dollar rates, all resulting in widening of Current account deficit. Future: Need to take stricter measures for inflation control. Oil prices coming down, so future prospects looking better.? CPI to be taken as surrogate for inflation, need to curb commodity prices. Investment and economy fundamentals remain strong, the potential for growth is present, more stress on agriculture as an investment than a liability. Fully leverage the large qualified human capital to make an impact in the global services industry.