India’s economy continues to falter. In the quarter from July to September, its growth rate shrunk from 5.5 to 5.3 percent, a three-year low. With only one month left, India looks like it will post one of its worst years in recent memory. The BBC News reports:
Weaker global demand for exports, a dip in foreign investment and a political stalemate over key reforms have been cited as key reasons behind the drop in the growth rate.
Prompted by fears that growth may slow further, the government has announced reforms to attract foreign investment in key sectors over the past few weeks.
At the same time, the RBI has — twice in two months — lowered the amount of money that banks need to keep in reserve to try to boost lending.
The moves are expected to inject 275bn rupees ($5bn; £3.1bn) into the markets.
The Indian government has recently been stepping up its reform program, and today’s growth numbers indicate why. India’s growth rate continues to drop dangerously close to the famous “Hindu rate of growth,” the low rate seen from 1950s to the 1980s, which is often attributed to the protectionist policies of that era.
Unfortunately, the reforms haven’t amounted to much yet. Corruption and inefficiency remain high, and plans to open the economy to foreign investment have been watered down in the face of strong opposition.
Slow economic growth in India is both a social catastrophe and a political threat. After years of wasting time, India’s government seems to have finally realized how costly delays in economic reforms can be. Let’s hope they’re willing to fight long and hard to put these in place.