There's a brilliant analysis by Gayatri Nayak, in the Economic Times today. Brilliant because that is something in plain data and in plain sight what every Corporate indian and even every Indian citizen otherwise or any other species observing India on the World stage wonders. We are the I in BRIC like the I in Team, we are the I in interest rates when the world is reducing them with alacrity to avoid a depression. Our oil still costs a $110 a barrel, 2 of the BRIC nations almost get it virtually free from their own energy resources, the third and the first citizen in every economic miracle now is China. even if everything in the Local Infrastructure run for China collapses, the 25% LGFV default will just reduce its growth to 0 when it is going through its slowest phae in manufacturing. nary a hope of a recession. And there the similarity with India ends, but with others it has much more in terms of dependence on commodities, energy, and hot money flow magnitudes that just d not compare with the rupee trading at its lowest.
Read the ET article here: http://economictimes.indiatimes.com/money-banking/with-high-inflation-and-weak-currency-india-not-like-other-bric-countries/articleshow/10060355.cms
The foremost problem is the speed at which the prices are rising -- from assets to commodities to manufacturing to services. This could deal a long-term blow to businesses, making them unviable. Prices have been gaining more than 8% for more than a year now. The main reason for the fall in profitability at companies is rising input prices and not finance charges as it is made out to be.
"India is less integrated with the global economy" was the argument then. While it may still be true when compared with many Asian emerging economies, this advantage has narrowed down over the years. While the overseas debt has gone up to $306 billion at the end of March 2011 from $221 billion at the end of March 2008, the cushion of foreign exchange reserves went down to $305 billion from $310 billion over the same period.
As far as decoupling is concerned, the bottom is the same for everyone but thence everyone of the global economies from the G7 to the G20 to even Mongolia would have decoupled on the way up . The great contrast in each competitive resource advantage and each strategy in Brazil, China, USA and Europe will determine very different trajectories of growth seenand supported in the Financial markets.
At stake is the order of magnitude of investment and infrastructure which others have harnessed earlier than India. But while the others may be volatile in responding to global stresses, India just becomes a sub standard risk to carry without the heat of a growth running up that order of magnitude. Others have much more command and control mechanisms as witnessed in Turkey and China, to ensure transmission of policy do's and don'ts. If we do, it stays confined to one single Corporate group or region The regional imbalances are much greater in china and Russia, even Brazil and the smaller economies are exclusively better risks for the global investor because they are entirely dependent on that investment and deliver abang for the buc k like Coal in indonesia and iron ore in Mongolia, but smehow that focus continues to deliver a faster sustainable growth while our discussion of imbalances makes evryone a victim in the end?
We could very easily be at the same stage as China if we had better transmission of policy cash and of policy mechanism to channel the growth. We may still be doing much more for our poor than China which has apparently been focussed on just the coastal "districts" ( urban conglomerates) that were already trading with Hongkong and the rest orf the world. But what we miss is the global demand or investor interest which cannot be just delivered to those shouting fromt he rooftops or those taking to the streets by fast and by suicides.
Witness the regulation journalism Indian corporate readers are subjected to normally on global policy : ET again: http://economictimes.indiatimes.com/opinion/guest-writer/can-china-elbow-aside-america-to-gain-economic-dominance/articleshow/10058550.cms
An administered rate of exchange with 10 rupees to the Dollar can bring it though. It will bring into focus our strategic decisions and investment in growth to a direct returns comparision with global investments. It is also the rate at which PPP trades for India to the Dollar. And it is probably the singular reason why no one bothers to hear us on the table or give us preference or deference in trade.
Probably why we are so happy at rupee depreciation so we can get more value for our immediate quarter from IT exports when export growth in cotton, tea and even coffee and oil could mean so much more to us. In non It exports we will still remain satisfied with 2 - 3million tonnes of Rice, wheat, Onion and some other crops but we remain the top 4 producers of those and fallin gbehind every year.
Probably our priorities for infrastructure investment also need that push to file up behind the Exports doing the best and easily sustainable as in agri-commodities and gems and Jewelry
but that is the cliched argument no one has acitoned for the last 60 years. never.
