India's feckless elite

Article Highlights

  • India's economic rise looks the least certain that it has since the early 2000s.

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  • India must grow by more than 7% annually to keep pace with the 13 million entrants into the job market.

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  • The rupee has spent much of 2012 touching historic new lows. @Dhume01

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Just the other day, it seemed as if India could hardly put a foot wrong. Annual economic growth averaged above eight percent between 2003 and ’08, and the country was one of the world’s few major economies to escape more or less unscathed from the global financial crisis. In November 2010, President Barack Obama made the longest foreign visit of his presidency to India. There, in a rousing address to Parliament, Obama declared that “India has emerged,” and pledged to back New Delhi’s quest for a permanent seat on an expanded United Nations Security Council. By then, authors and analysts had already churned out a small rainforest worth of books and articles asserting that the 21st century belonged to Asia’s two giants, China and India.

Two years later, India’s rise looks a lot less certain. Economic growth slowed to an annual rate of 5.5 percent in the first quarter of the current fiscal year, and few independent analysts expected it to top six percent in the rest of the year. For a country still at an early stage of development—in dollar terms, the average Indian earns about as much as the average Chinese did in 2004—this augurs ill. Most economists believe that India needs to grow by more than seven percent annually merely to keep pace with the 13 million new entrants into the job market each year. (China’s growth rate, even after declining from its former torrid pace, is eight percent.) Pratap Bhanu Mehta, president of the Centre for Policy Research, in New Delhi, says India is “flirting with social catastrophe.”

Flagging growth isn’t the only cause for concern. Foreign direct investment plummeted 67 percent in the first quarter of the current fiscal year, to $4.4 billion. The rupee has spent much of 2012 touching historic new lows. (By mid-September, it had lost 20 percent against the dollar over the past 12 months.) Though arguably a one-off event, the massive power outage in July that left 600 million people without electricity dramatized the parlous state of Indian infrastructure to the world. The blackout was a powerful follow-up to a stark warning from ratings agency Standard and Poor’s the previous month—that India risked becoming the first “fallen angel” among the BRIC economies (Brazil, Russia, India, and China).

The full article is available at WilsonQuarterly.com

 

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