Wednesday, May 30, 2012

UH-OH: EVEN INDIA'S ECONOMY IS HEADING INTO RECESSION

NYTIMES: India’s Economy Slows, With Global Implications
India’s currency, the rupee, is falling; investment is down; inflation is rising; and deficits are eating away at government coffers. Laborers unloading wood from a truck in Kolkata this month. India may be unable to help lead the world out of recession. 
While short-term growth has slowed but not ground to a halt, India’s problems have dampened hopes that it, along with China and other non-Western economies, might help revive the global economy, as happened after the 2008 financial crisis. Instead, India is now facing a political reckoning, as the country’s elected leaders must address difficult, politically unpopular decisions — or risk even deeper problems.... the slowdown has punctured the once bubbly mood in the business and political classes and brought sharp criticism of the government. Indian business leaders, foreign investors and analysts say India’s strengths are being undermined by growing political dysfunction: the populist tendencies of Indian politicians, a lack of action by top leaders and allegations of corruption that have undermined the authority of policy makers.

India is desperate for investment in mining, roads, ports, urban housing and other areas, but Indian businesses and foreign investors are starting to shy away. Indian corporations, unable to obtain governmental licenses or permissions for projects, are investing overseas instead. Foreigners are also pulling back; their investment in Indian stocks and bonds totaled only $16 billion in the last fiscal year, compared with $30 billion the year before. The trend accelerated in recent months after the Finance Ministry, trying to stem a rising budget deficit, proposed a raft of new taxes on foreign institutions doing business in India.
ON THE OTHER HAND:

Kaushik Basu, the government’s chief economic adviser, acknowledged that the government had made mistakes and had missed opportunities to better position India as the global economic landscape shifts. Yet he said that the rising pessimism was unwarranted and that India was still growing, still had high investment and savings rates, and should take advantage of the depreciation of the rupee to push exports. He said India’s problems were no worse than those in other emerging economies. “It is a difficult stage,” Mr. Basu said in an interview. “But I do remain very, very optimistic. Six months and we will pull up.”

I AM NOT SO OPTIMISTIC: WHIT EUROPE IN RECESSION ANS CHINA HEADED THERE, INDIA WILL SLIP INTO RECESSION, TOO.

IOW: A GLOBAL CRASH IS COMING...

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