Friday, March 03, 2006

"Fast track"
The Economist Feb 16th, 2006

This article evaluates the current state of the Indian economy at the eve of the new budget being presented by India's finance minister. While India has certainly taken rapid strides in the past recent years-economic growth continues to remain robust, and inflation is in check-problems abound. The overall government deficit currently stands at 7.7% of GDP well above what economists are traditionally comfortable with. India's "infrastructure deficit" also remains a cause for concern and is unlikely to be addressed by the new budget. According to the author, with elections around the corner, the government is unlikely to rein in subsidies, which means that much-needed infrastructure development in the form of improving roads and ports and increasing the provision of electricity, is unlikely to occur.

What the article does not discuss, but is of importance in this context is the misallocation of government monies in the name of "subsidies" that rounitely occurs in the India, and is a serious bottleneck to sustainable growth.

No comments: