In 1991, India had to pledge its gold to raise foreign exchange to pay off debts. While it may not be in such dire straits right now, Indian firms have to pay back some $137 billion this year itself to lenders at a time the country has a foreign exchange reserves of $290 billion, down from $308.5 billion in May 2011.
FirstPost: Shocker: India’s GDP slumps to 5.3 percent, lowest since 2003
FirstPost: Core sector growth halves to 2.2 percent in April
Venky Vembu: Pranab-da, stop being in denial: the worst is far from over
Pranab-da’s reading – that the “worst is over” – is fundamentally flawed. Since the government has not even begun to address the structural nature of the problems – the runaway deficits, the subsidy pile, the collapse of investments – the slowdown will drag on for a lot longer.
Thus far, the government has been running scared of taking the bold measures that, while inflicting pain in the short term, are necessary to revive growth over the medium term. Its chickening out of the move to raise the price of diesel and LPG, and even its manifest attempts to distance itself from the recent petrol price hike (claiming fatuously that it was an administrative decision by oil marketing companies) doesn’t bode well for remedial policy action.