From: sanjeev nayyar
|Shankar Acharya: Macro signals flashing red|
|The Indian economy is stumbling towards a major crisis, but who cares?|
|Shankar Acharya / Sep 13, 2012, 00:25 IST|
It is common knowledge that the Indian economy has not just been doing badly for over a year but is actually stumbling towards a major economic crisis. The government seems incapable of remedial action, punch-drunk by successive scams, political weakness, internal incoherence and perhaps even sheer incompetence. It’s beginning to feel like a classic tragedy where a nasty end seems increasingly unavoidable. All that an external observer can do is record the painful journey. The macroeconomic data that have emerged over the past couple of weeks or so all point to a worsening situation.Economic growth
We now know that economic growth in April-June 2012 was 5.5 per cent, meaning that in the first half of calendar 2012 India grew at 5.4 per cent, far below the 8.4 per cent rate of 2009-10 and 2010-11, not to mention the nine per cent average of 2003-08 and an initial aspiration of nine per cent-plus for the 12th Plan period. In fact, news reports that the Planning Commission is debating a revised target growth in the range of 8.2 to nine per cent for the 12th Plan appear sadly laughable in the current context.
Furthermore, the data for the first half of 2012 show no growth in manufacturing, barely two per cent in mining and 2.3 per cent in agriculture. With such low growth in the main commodity sectors, it is difficult to understand how service sectors such as construction, finance and business services continue to record double-digit growth rates. Who knows, perhaps all the numbers will be significantly revised in a few months!