Thursday, September 18, 2003
The Economist on the Indian Economy
The new issue of The Economist is carrying a survey on the state of India's economy, agreeing with the general consensus of 6% growth for the year. Cautiously, the survey even suggests that an investment boom might be in the offing.
In 2002, a subdued year for the world economy, India's exports grew by 19.2%, a rate beaten only by China, whose currency, Indian exporters point out, is notoriously undervalued, whereas the rupee has, unusually, been appreciating against the dollar. However, India's is still, in global terms, an economy that has a long way to go before it looks very much like a tiger. Last year it accounted for just 0.8% of world exports.
It is true that many Indian firms are exhibiting new signs of self-confidence. Indeed, China itself, long seen by Indian businesses as a threat, is now seen by some as an opportunity. The success there of Indian steelmakers, to take an old economy example, has been such that they have been exceeding the quantitative quota (3% of steel imports) that China imposes on them.
Asked to explain the rosier outlook, manufacturers cite one factor above all: the sharp decline in interest rates—from an annual rate of roughly 12% to half that—in the past five years. Besides beautifying company balance sheets, this is encouraging consumers to borrow, to buy cars, for example, and build houses.
PS: The cover of the new issue is worth a look :)
In 2002, a subdued year for the world economy, India's exports grew by 19.2%, a rate beaten only by China, whose currency, Indian exporters point out, is notoriously undervalued, whereas the rupee has, unusually, been appreciating against the dollar. However, India's is still, in global terms, an economy that has a long way to go before it looks very much like a tiger. Last year it accounted for just 0.8% of world exports.
It is true that many Indian firms are exhibiting new signs of self-confidence. Indeed, China itself, long seen by Indian businesses as a threat, is now seen by some as an opportunity. The success there of Indian steelmakers, to take an old economy example, has been such that they have been exceeding the quantitative quota (3% of steel imports) that China imposes on them.
Asked to explain the rosier outlook, manufacturers cite one factor above all: the sharp decline in interest rates—from an annual rate of roughly 12% to half that—in the past five years. Besides beautifying company balance sheets, this is encouraging consumers to borrow, to buy cars, for example, and build houses.
PS: The cover of the new issue is worth a look :)
