Policy Paralysis in India Essay

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Policy paralysis- this seemed to be the favorite word of all analysts and journalists in newspapers, TV and all media since the beginning of this year. Well, the government seems to have recovered from paralysis and taken some giant strides in the last week. I just hope it sustains this movement and pushes few other key reforms. Since Goldman Sachs came out with the BRIC report, the global investors have been fond of the India story. The economy grew at a solid pace, with moderate inflation since 2000. In 1991, Indian economy was opened up and reforms were enacted. This was done under a do or die situation, with the country reeling under balance of payments crisis. From then India seems to be on a growth trajectory. As per the RBI data, after recording a rise of 8.4 per cent during 2009-10 and 2010-11, growth dropped to 6.5 per cent in 2011-12. Growth in Q4 of 2011-12 was 5.3 per cent, the lowest in past 29 quarters. The drop in growth is a result of combination of both global and domestic factors. Global economic crisis leading to weak exports, long and persistent inflation, widening twin deficits, falling investments, stalled industrial and infrastructure projects have adverse impacts on the growth. This year S&P downgraded the outlook on India’s rating to negative and this would result in India losing its investment grade status. Rupee has depreciated significantly – worst performing currency amongst the major emerging markets. All the scams – 2G spectrum, coal block allocation have further affected the investor sentiment. The major concerns in the Indian economy are 1. High inflation: The RBI’s target inflation is 5% but inflation has been hovering at levels significantly higher. The high inflation phase that started in the last quarter of 2009-10 persisted over two consecutive years. Inflation remained elevated at over 9 per cent in the first eight months of

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