The India growth story is over

IndiraVergis

India’s growth story is quite likely over, at least in the medium term, given the lacklustre way the government is managing the economy. No economic reforms, no control over its fiscal and current account deficit, a plunging rupee and the total lack of effort to improve supply-side issues to reduce inflationary pressures are just some of the problems that are plaguing the economy. The RBI has done all the heavy lifting so far in terms of calibrating interest rates, but there is only so much it can do. Now, the economy has entered a phase of stagflation, and unless the government does something to change this situation, ‘stagflation’, instead of ‘growth’, will be the new word used to describe India’s economy.  read less read more

Venky Vembu

Sometimes governments living in la-la land need a kick in the pants to be woken up. Today’s GDP shock lands one such well-aimed kick where it ought to hurt. If this doesn’t compel the government to act, there will be more such kicks – until it does.   In India, painful policy decisions get taken not by choice but out of compulsion. Reforms happen only by stealth – or when governments are dragged kicking and screaming to the market place. To that end, today’s data release, which shows an economy in a tailspin, is infinitely better than a moderately tepid growth number would have been. Only this way can the smug complacency of the policymakers be shattered.   Bleak as the growth outlook looks in the short term, and grim though the external environment is, India’s long-term growth story can still be retrieved with the right policies. For sure, we won’t see a return to the 9 percent growth rate for a long time, and it’s going to take a lot of hard work, and much pain, before the economy revives. But out of the rubble, order will emerge. read less read more