Editor’s page
BATTLING THE SLUMP HOUR
India Inc is now facing its acid test. Its dream run of a
growth rate nudging close to 9 per cent plus has taken a beating
in the wake of the price of an oil barrel reaching $140, inflation
touching 12 per cent, and the good old rupee losing its recently
acquired allure. Veritably India’s growth story has
been held hostage and has been stonewalled by the economic
ogre. There is plenty of evidence to bolster that assessment.
There has been a marked decline in industrial production
with the growth of capital goods slowed down to 6.5 per cent
from 16.9 per cent last year. Further with oil prices shooting
in excess of $140 and inflation touching 12 per cent there
is despondency in India’s financial and corporate canyons
with the NIFTY 50 going down 30 per cent in the last six months.
Meanwhile the Bombay Stock Exchange Index which had set its
targets for 28,000 in the beginning of the year now faces
the prospect of the figure dipping down to four digits. It
is currently down 35 per cent from its all time high of 21,206.77
on January 10,2008. Business confidence too is now at its
lowest ebb. This year FIIs have taken out Rs 27,112 crore
since January while last year between January and December
Rs 71,487 crore was pumped in. Understandably there is bad
news for those who were flattered by the upward march of the
rupee. This year so far the rupee has depreciated 8.2 per
cent. Due to the deterioration in the Central Government’s
fiscal position in 2008-09 Fitch Ratings was led to downgrade
India’s currency rating in the first week of July. The
verdict from the country’s apex bank is that the economy
will grow by 8.9 per cent in 2008 from 9 per cent rate it
had posted in the last fiscal.
What is worrisome is that things have not augured well on
the infrastructure projects front as well.
According to a recent report by the Centre for Monitoring
Indian Economy (CMIE) as many as 39 projects aggregating Rs
17,896 crore were shelved in the first quarter ended March
31, 2008 as against 16 projects worth Rs 10,695 crore during
a corresponding period last year. Indeed projects today have
hit a speed-breaker evident from the slippage in the number
of completed projects.
Sure it is not quite recession yet - the elephant, despite
its restricted pace, may yet bulldoze its way on the path
India has set for itself - but all the indicators of an economic
slump seem to be present at the moment.
Mercifully much of the debilitating impact has not been felt
across the core areas of infrastructure and has instead been
restricted to the real estate segment. What is also heartening
is that the vast majority of infrastructure projects that
are already under progress are not at risk of being abandoned.
The minders of the nation are aware of the importance of continued
growth.
The pachyderm must persevere on its journey towards progress
despite the roadblocks. India will.
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