Can India economic success story go wrong?

Friday, December 24, 2010

Can India economic success story go wrong?

Everyone in India is aware of the kind of success Indian economy has gained, yet, Indian economic success is not that universal, compared to say, China.

Many leading Indian economists still believe that Indian economic growth is still at a growing stage, and calling India as ‘already emerged’ would be a wrong way of assigning status to India’s growth.

Though, American President Barrack Obama has commented that India has arrived, or has emerged in the global scene, still, there are lot of factors which is still at a nascent stage, before India could be called a global economic power.

However, there’s no doubt that India had fared better to everyone’s surprise. The long list of economic success together with a long haul of purchases from the American and Chinese firms certainly speaks of India’s recent economic success.

The big question is how the government would handle the foreign direct investment.

The government’s capability to handle foreign direct investment would determine how India grows from here on. India is more concerned now with FII flows, but it’s more important for the government to understand that controlling volumes of foreign direct investment (FDI) is more important that FII flows. India should make sure that it controls the FDI investment as early and swiftly as possible. It is exactly where the loop of success of the Indian economic success originates.

External and domestic risks

Do you think just because India is growing a rate of close to 9%, everything is perfectly fine? Or may be perhaps, India has Sensex sitting pretty around 20,000, everything is perfect on the economy front for India.

You may be wrong. The current account deficit which India has at the moment needs to be financed, and the government needs to have a look in. if the government could ensure that India could finance its current account deficit, which could be anything between 2-3%, or it could be more, due to domestically driven growth, then India is surely going to succeed in the future, or would continue its present growth trend.

But if, anything goes wrong, and India economic policy is not able to cover up its current account deficit, it could probably end the economic growth in India.

The government of India certainly knows it and will work to ensure that India continues to grow in the future.

1 comment:

bhattathiri said...

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