Via Meadia has been nervously pointing to signs of slowing growth and stalled reforms in India. The slowdown is taking a heavy toll: In the first three months of 2012, GDP growth dropped to the lowest level in nine years.The FT reports:
Sharp falls in the manufacturing and agriculture sectors led Asia’s third-largest economy to grow only 5.3 per cent year on year in the quarter, compared with 9.2 per cent growth a year earlier.This is the worst performance of India’s economy since 2003 and far worse than the situation in the wake of the global financial crisis and the collapse of Lehman Brothers in late 2008, adding pressure on policy makers to take emergency actions to revive the country’s growth.
Growth is forecasted to remain low (a little above 6 percent) for the rest of this year and 2013. Though global economic problems are playing a role in India’s slowdown, many of India’s injuries are internal and self-inflicted. Parliament is paralyzed, economic reforms stall before takeoff, and the government is plagued by corruption scandals.There are security problems too, as C. Raja Mohan (an American Interest board member) and Ajai Sahni detail in a paper for the National Bureau for Asian Research. Terrorist attacks have dropped in recent years, and the situation in Kashmir has stabilized, but socio-economic situation of the “other India”—the “India of grinding poverty for millions, increasing rural distress, mass suicides by bankrupted farmers, chronic and endemic malnutrition, and vast developmental dislocations that punish the poor”—is a serious worry for the country as a whole.India has been cast as a great democracy on a path to global power. Its gross national product is expected to rival or even overtake several European nations in the next few decades. But India’s path will be fraught with speed bumps. Some of those speed bumps will come from external, uncontrollable forces, but increasingly security issues and grinding poverty will pose the biggest threats to India’s future. And what happens in India will reverberate not just throughout Asia, but across the entire world.