India was on the verge of bankruptcy on the sovereign debt, because of the high current account deficit. The fault that is directly proportional increase levels of foreign debt and steep fiscal deficit ( gap b/w government’s exp and earnings). The country’s Foreign exchange reserves were not enough to pay the debt.
As of today, the govt targeted 9% has slowed down to 6.5% for the current year ending March 2012.The reform process has all but stalled. India’s current and fiscal deficits are both high, and a recent government bill to provide food security to India’s masses, will likely worsen India’s financial burden.
Current Account Deficit (The difference between a nation’s total exports of goods, services and transfers, and its total imports of them)
THEN: The current account deficit was estimated to be “more than 2.5% of gross domestic product in 1990-91,” said Mr. Singh in his speech. He described India’s balance of payments situation as “exceedingly difficult.”
NOW: For years after the 1991 crises, the Indian government contained the current account deficit to less than 2% of GDP. But in recent years, the deficit has ballooned to 1991-like levels, thanks partly to higher imports and more recently lower exports. For the year through March 2012, economists expect the deficit to come at around 3% of GDP
Fiscal Deficit (The difference between the government’s total revenue and its expenditure)
THEN: The fiscal deficit is “estimated at more than 8% of GDP in 1990-91,” said Mr. Singh in his speech, calling it “a cause for serious concern.” He said “It should be our objective to progressively reduce the fiscal deficit of the Central Government…and to reduce the current account deficit in the balance of payments.”
NOW: The fiscal deficit for the year-ended March 2012 is expected to come in at 5.5% or 6% of GDP, much higher than the government’s targeted 4.6%. The food subsidy bill will add to this burden, say economists, unless the government cuts back on its expenditure proportionately.
Then: 12.1% the poorer section of the society where the worst sufferers of the high prices.
Now: The Reserve Bank of India has been battling 9% to 10% inflation, by increasing benchmark interest rates 13 times
No Power on earth can stop an idea whose time has come. I suggest that the emergence of India as a major economic power in the world happens to be one such idea. Let the whole world hear it loud and clear. India as a nation wide awake, we shall prevail, we shall overcome.
lets simply procedures for Indian investors and increase awareness and penetration before we worry about foreign retail investors!