Multi-organ failure: The economy has been in the ICU for more than a year

Abstract

THE Indian economy is passing through an extremely critical situation which was acknowledged by the RBI last fortnight by raising the interest rates. The economy is suffering not only from the global spillovers but also from domestic ailments for quite some time now. This is reflected not only in the lower growth rate of 4.4 per cent in the first quarter of 2013-14 but also in the spluttering exchange rate. The global spillovers are expected to continue, probably worsen, once the unwinding of the unconventional monetary policy actually begins in the US. The scenario is expected to be challenging amid the ever-widening current account deficit (CAD), worsening fiscal targets, persistence of high inflation, slowing growth, deteriorating asset quality of banks and depleting levels of confidence of the markets in governance.

These challenges are not easy to face for any country. But first we must have the correct diagnosis and only then can we strategise to stage a respectable recovery. The first signs of deterioration in the economy, if analysed on a quarterly basis in a dis-aggregated manner, began in 2009-10 with CAD of more than 3 per cent of GDP in three quarters. In 2010-11 manufacturing had succumbed to lower growth and by 2011-12 services and construction followed suit. Thus the country has been in the ICU, in the economic sense, for more than a year with a multi-organ failure. Read more at: https://www.tribuneindia.com/2013/20131012/edit.htm#9