Economic Crisis in India

Topics: Macroeconomics, Investment, Economics Pages: 3 (1163 words) Published: September 7, 2013
After India survived the Dotcom bubble in 1997-2000. enthusiastic investment bankers and financial research analysts were tom-toming the “India–shining “story .They forecasted that India would become a major superpower within the next few decades .They forecasted India to grow at an annual rate of 10 %. Billions got invested into India and the sudden influx of money led to some growth .But certain fundamental questions whether this sort of growth would be sustainable in the long run or not, is the infrastructure in the place ,are the taxation and environmental policies conducive to growth were ignored because it was all masked by the temporary spurt of growth . Since none of the fundamentals were in place the money coming inside the country could barely do anything .though a few projects happened and their products sold well but eventually growth petered out. The government on started spending more then its earning and import bills began to rise steadily .this led to an adverse balance of payment position with the present Current Account Deficit lingering at a dangerous 4.8% of the GDP .

Whereas the banking sector began pumping the economy with more notes which led to inflation . Petrol ,diesel and fuel prices began to sky rocket which thus began to pinch the common man’s pocket .Consumer spending decreased which led to a decrease in demand .The vicious cycle of low demand –decrease in production –job cuts began .

Is the present Indian economy in the midst of an economic crisis? Yes , we are whether the government would like to admit to it or not . How else would you describe a situation where economic growth has collapsed, industrial output has stagnated for two years, jobs are being shed, consumer inflation is close to 10 per cent, gold prices are rising by the hour , the current account deficit in the balance of payments is nearly five per cent of GDP and   the rupee is touching new lows (or highs against the dollar!) each week?...
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