India Growth Story

Apparently I did a lot of India growth stories through my postings. In the month of April when S&P downgraded India BBB- ?   that is the last rung in the ratings grade of S&P ,downgrade from here meaning India will be having speculative grade rating. I am very positive about it I don’t believe India’s growth problems are mainly related to global slow down. They are more structural in nature & need systemic changes.

Yesterday again S&P gave the red signal that India could be 1st BRIC to lose investment grade. Just look back at the time when India wasn’t investment grade. Did it matter? No rating changed much after things were good.

I am certainly surprised by the pessimism about India’s economy. India was used to the ‘Hindu growth rate’ of about 3.5-4% or so for quite a long time. The very fact that an expected growth rate of about 6% over the next couple of years has resulted in everyone – from the ‘jackass media’ to the corporates and the ‘common man’ – baying for the government‘s blood is, in my opinion, a decent development.

You may see the push now otherwise it can be true that the government cannot hope to return to power if it continues to work as it has been. It will have to take decisions, however unpleasant and unpalatable to itself and the public.

As you know yesterday some remarks were made against the rating agency by the politicians it would rather than berate the rating agencies, we should buckle down to the needed reforms as we see them necessary.

To be precise “spirals of optimism” take place in markets and economies, so to do “spirals of despair”. India is suffering from the second type of spiral today and it is not clear what might break it. But eventually something will come along—“India is going to come out on top.

6 thoughts on “India Growth Story

  1. your post ends with a dash of unfounded hopefulness.. in my opinion the pessimism stems from the inertia on policy making.. and credit rating agencies’ actions have focused a lot on a country’s agility in taking strong policy actions as an important factor in ratings assessment. So, can u blame them.. (this argument is made by assuming that the ratings process are sacrosanct)

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    1. Thanks Nandita for your remarks. I have put down many times that the reason for hopefulness is that certainly the time for push has come. No political party in power wants reform because it annoys the mass, it is always the push from corporates and industries that govt need to take sooner rather than later. About the sacrosanct of rating agencies not more can be said The subprime crisis, The Euro crisis are live examples, at least India has the real domestic consumption power.

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      1. yea.. okay.. i see your point.. but sometimes corporate push turns into lobbying and it becomes counterproductive to the idea of reform.. but yea.. lets see where this push comes from.. FM is quite hopeful about the next year… i guess there is your hope reflected.. 🙂

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      2. I hope its not lobbying this time rather the need of an hour . It will be a sad day for India when the ‘I’ in BRICS could be replaced by Indonesia

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