Thursday, March 12, 2009

India’s economy remains strong in the credit crisis, yet vulnerable on a number of fronts

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Truth, in ‘brown’ & white

Although agricultural output has increased manifold, it is not yet upto world standard in per capita terms due to some basic problems – small land holdings by farmers, illiteracy, poor irrigation processes, lack of modern irrigation facilities and adaptation of modern agricultural practices. It has over 10% of global coal reserves. Performance of various industries is satisfactory. There are 34 companies enlisted in the Forbes Global 2000 ranking in 2008. The same boom is equally witnessed in transport, export, travel, tourism and every other sector.

As of now, the economy seems strong and stable enough, except for worries like inflation and liquidity crunch, which have kept the RBI busy over the past few months. Sensex has plummeted from the heady days of 18,000 to 8,023 at the time of writing; largely due to the withdrawal by FIIs. This has exposed one major vulnerability of Indian stock markets, and the much touted boom it witnessed in recent times. Also exposed is the vulnerability of our economy to the US market, as demand slowdown there is hampering Indian software and services exports.

One of the most comprehensive tools to measure any country’s economic strength is the Global Competitiveness Index (GCI), which is defined as the set of institutions, policies, and factors that determine the level of productivity of that country. Though India (ranked 50) has witnessed significant improvement compare to the last decade with its substantial market size, sophistication of business and innovation potential, it is still behind countries like Kuwait, Chile & Tunisia!

For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).


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