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India’s GDP shows continuing slowdown

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I_69554780_rupee.2.gndia’s economy continues to slowdown according to the latest government figures.

For the April-to-June quarter, it grew at a rate of 4.4%, compared with the same period in the previous year.

It was a weaker performance than most economists had been expecting and was a slowdown from the first three months of the year, when growth was 4.8%.

A contraction in mining and manufacturing activity was behind the slowdown.

Friday’s figures show the economy is now expanding at the slowest rate since 2009.

“We do not wish to sound alarmist, but concern on the economy can hardly be overstated,” said Chandrajit Banerjee, Director General, Confederation of Indian Industry, in reaction to the latest figures.

“The economy needs the undivided attention of policy makers,” she said.

It adds to the pressure on Indian Prime Minister Manmohan Singh, who earlier addressed parliament over the nation’s economic problems.

“Growth may have slowed from the heady days of 7%-plus growth, which was more than double America’s in the late 1990s and 2000s, but it’s still a decent clip”

Linda Yueh
Chief business correspondent

In his statement to parliament, made before the figures were released, the prime minister said India was not facing a repeat of the crisis in 1991.

Back then, India’s foreign currency reserves became so depleted that it had to borrow from the International Monetary Fund to pay its import bills.

“Growth will pick up in the second half, barring extreme unforeseen eventualities,” the prime minister said.

He also said that a strong monsoon would boost harvests and help reduce food inflation.

Mr Singh was also keen to reassure the nation over the falling value of the Indian rupee, saying it was “a matter of concern”.

The rupee hit a record low against the dollar on Wednesday and has fallen more than 20% this year.

That fall is damaging for the economy, as India imports large amounts of fuel and foodstuffs and the weak rupee makes those imports more expensive.

Mr Singh said: “Clearly, we need to reduce our appetite for gold, economise [on] the use of petroleum products and take steps to increase our exports.”

Repercussions
He also blamed the fall in the rupee on “external” factors.

The prime minister highlighted the impact of developments in the US, where the economy is improving and officials at the central bank have started to talk about cutting back on stimulus measures.

“In a more equitable world order, it is only appropriate that the developed countries – in pursuing their fiscal and monetary policies – should take into account the repercussions on the economy of emerging countries,” he said.

The Indian government has raised the import duty on gold and increased deposit rates to stem the outflow of money

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18 Comments

  1. Hemen Parekh says:

    Saturday, 31 August 2013
    Time for ” Out of Box ” thinking ?

    Of late , there has been a lot of debate on TV / Newspapers etc , on ,

    > What has caused current economic crisis

    > What needs to be done

    > Who is to blame

    The crisis manifests itself thru ,

    > Falling Stock Index

    > Weakening Rupee

    > Increasing Imports

    > Decreasing Exports

    > Widening CAD / Fiscal Deficit

    > Sliding Industrial Production

    > Falling GDP

    > Rising Unemployment …… etc

    Economists ( experts and otherwise ) are offering all kinds of solutions – often contradictory

    Only thing , they all seem to agree upon is that , current Central Government , is largely to be blamed for the current mess !

    I am not an economist and unable to offer ” Expert Solution ”

    But I do have following simple , non-expert solution :

    ” Through ” No Questions Asked ” , appropriate Amnesty Schemes , enable trillions of Black Money rupees to come out in the open , to fund the Infrastructure projects ”

    Our Government estimates that we need to pump in , every year , $ 100 Billions , for the next 10 years , into infrastructure development , ie , $ 1,000 billions

    Our Commerce Minister , Anand Sharma , estimates that the Indians are hoarding 31,000 tons of Gold ( equivalent of $ 1,400 billions )

    Given our current economic climate , I dont expect any foreign individuals / companies / financial institutions etc to come forward to invest such funds into India

    What is worse , I expect , once again in 2014 , a ” Coalition Government ” to rule the Centre – fully paralysed by its Coalition Dharma and incapable of taking tough decisions !

    Apart from that $ 1,400 billion worth of gold , it would be safe to assume that another $ 14,000 billion worth of cash Black Money is also lying locked up in Safe Deposit Vaults of Businessmen / Politicians and Government Officers !

    Grant them amnesty and a 10 % ( non – taxable ) return on such Infrastructure investments for a period of 10 years , and we won’t need any foreign exchange inflow !

    Some will argue :

    You will be punishing honest tax-payers and rewarding the cheats !

    True

    But , in my opinion , this is the only practical / viable solution , in short term

    And , if incorporated in the Feb 2014 budget , it will get approved unanimously !

    If those ” Cheats ” can help create 100 million jobs in 10 years , forgive them for their dis-honesty !

    It is high time we did some ” Out – of – the – Box ” thinking !

    Morality of creating jobs today , far outweighs the immorality of tax-evason in the past !

    — hemen

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