Depressed Indian economy: All-out effort to accelerate growth required

Abstract

IN the RBI's first quarter report for 2013-14 the worst expected has materialised as many argumentative economists, visiting and resident in India, would amicably agree. The growth projection for 2013-14 has been revised downward as domestic economic activity weakened during April-June 1013. Industrial production is muted and consumer durables have declined mainly due to a fall in passenger cars and motorbikes.

The capital account deficit (CAD) is expected to deteriorate as the jaws of trade deficit have widened, on account of contraction in exports and a sharp rise in gold imports. The risks to CAD have increased as unwinding of the unconventional policy in the US begins, as was evident by the trailer that had caused global bond sell-off and capital outflows from the emerging markets. Worst still, external sector vulnerability indicators have deteriorated, especially short-term debt rising to 44 per cent of the total debt at the end of March, 2013.

So, very worrisome is the fact that the services sector has recorded the lowest growth in 11 long years. The asset quality of the banking sector has deteriorated which has kept the credit growth below the indicative trajectory. Despite such a tight monetary policy, CPI inflation has hovered around double digits and food inflation has not eased up either, though WPI inflation has been lower than 5 percent. In a nutshell, everything except inflation, house prices and subsidies, is down and so also are business expectations. As would be anticipated, having taken strong monetary measures in the last fortnight, monetary policy has not initiated any change in interest rates, which have already been high for some time now. Read more at: https://www.tribuneindia.com/2013/20130805/edit.htm#4