Just Another BRIC in the Wall
The key macroeconomic indicators for India are in the tank, growth has dropped below 5%, the rupee is falling, the infrastructure is crumbling and the inflation is soaring. Be that as it may, I don’t buy all the doom and gloom and concern trolling about India just as I did not buy the hype about shining India, poised to become one of the world’s leading economies.
Don’t get me wrong, India’s structural* problems are immense, there is a huge off-the books economy, the tax base is meager, the infrastructure is inadequate and the politics is dysfunctional. However, all these factors were present during the years when India was supposed to be booming. However, they were either ignored or downplayed by the media because it didn’t fit into the narrative of India as a dominant new economic power. India’s prosperity during the last decade was not broad based and only a tiny sliver of Indians who had access to capital or good education or both, benefitted from the booming economy. If you look at GDP/capita, a crude measure of how well an average person in India is doing, India does not even finish in the top 100. Blaming the programs for the needy for the current downturn is the height of cynicism, since India has no safety net to speak of and millions go hungry as a matter of course.
Though India is getting the front page treatment, the news from other BRIC countries is no different. This latest downturn seems to be more due to international capital flows than something unique to India. Also, the much touted advantages of India, a vast middle class, engaged civil society, remain. More likely than not this a temporary blip. India has huge problems that it needs to tackle but I don’t think they are responsible for India’s latest economic crisis.
(*economic speak for long term problems as opposed to short term or cyclical problems related to demand and supply)