Economy needs a quick fix
India’s GDP grew by mere 5.3 per cent in January-March 2012 (Q4) quarter, which is even lower than when the Lehman Brothers crisis had hit the world. This is the fourth straight quarter of decline in GDP.
This was not entirely unexpected said State Bank of India economist Brinda Jagirdar. There had been weak IIP numbers, weak core sector numbers, falling exports so one expected the fourth quarter GDP to be weak. “But this pulled down the growth figure for the whole year and this is a concern,” she said, adding that this is part of the cooling of demand that the RBI wanted while tightening policy rates.
Blaming government inaction on slowdown, former RBI governor Bimal Jalan said, “There are too many voice speaking in different directions. There is no co-ordinated effort from the government to look into the problems. There is even no consolidate effort to move in any policy area. With so many voices speaking no one knows what is really happening, not even media,” said Mr Jalan.
He said “The political shape of our democracy is such that in a 543-member house a party with 5 and 15 members can hold policy to ransom. “It’s a systemic problem that is difficult to handle. This is a wake up call for political reforms, the need to tackle corruption, and delays and bring the different voices together,” he added.
The RBI must cut interest rates, said Mr Pradip Shah, chairman IndAsia Fund Advisor. Brazil, Indonesia and even China had cut interest rates and this helped their growth. The RBI is not the only guardian of inflation, he said.
Most economists agree that this does not mean the end of growth. The numbers are disappointing and the private sector has also slowed down, said Crisil economist D.K. Joshi, adding that the if the sectoral bottlenecks are removed and mining and land issues are resolved an environment can be created for an upside to growth.
Mr D R Dogra, managing director of Care Ratings said that “when RBI stopped raising interest rates we thought that in six months interest rates and inflation would come down and capital formation would take place. But now we can’t say with certainty. Government must take measures to reduce the subsidies,” he said.
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