Saturday, Aug 20, 2022
Outlook.com
Economy

Fasting For Feasting

It's time to get real. Ignoring infrastructure for software has led to the economy slowing down.

Fasting For Feasting
Fasting For Feasting
outlookindia.com
-0001-11-30T00:00:00+05:53

The initial reaction was one of shock and disbelief. Then, true to our national character, vehement denial. Here we are, Asia's biggest emerging market and infotech powerhouse, how can we be downgraded by a credit-rating agency like Standard and Poor's? Especially when Moody's has confirmed its positive outlook on India? Surely S&P's is over-reacting to a little fiscal slippage and industrial slowdown?

Is S&P's acting a little too propah by downgrading India's investment outlook from positive in March to stable now? Let's look at some general numbers. The April-June industrial growth rate has slipped to a pathetic 5.6 per cent compared to more than 10.5 per cent notched during October-March. Could that be seasonal? Perhaps not, since even in the first quarter of last fiscal, the Index of Industrial Production grew by 7 per cent. As for the little fiscal overkill, combined central and state fiscal deficit is again back at 10 per cent of the gdp. With $3 billion vanishing from forex reserves and external inflows slowing down, the current account deficit is expected to double to $8 billion this year. Add to it the rising inflation, feared to touch 8 per cent, and the 66 per cent rise in petrogoods prices in a single year, you could be staring at a potential harkback to the pre-reform era.

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