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Is Indian economy going to derail?
By siliconindia
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Thursday, 19 June 2008, 00:50 IST
California: Experts at the inaugural 'New York University business forum on India' expressed misgivings about the countrys so-far enviable growth story, thanks to the government's budgetary constraints and its inability to make structural changes.
Addressing a panel titled 'Can global financial turmoil derail India's growth? The panelist including Arvind Sanger, Managing Partner, GeoSphere Capital Management, and Anil Kumar, Founder and Managing Director, Virtus Global Partners saw the future of India in terms of growth somewhere between derailment and slowdown.
"I feel India is probably going to derail and be probably one of the worst performing markets in the next couple of years. I think it is not the global economic turmoil but the fact that in India the chicken is coming home to roost," said Sanger.
"The most dramatic thing that this government has done is to push through airport privatization. Problem now is not the global economic turmoil but the rise in energy prices and the fertilizers prices and the loan waivers that the government has just announced in the budget," Sanger said.
Noting that there has been petrol rationing in India because the oil companies can no longer afford to lose money as they are running out of cash, he said, "the government which was so worried about re-election has now a gun pointed to its head and is going to have to raise praises."
He predicted that inflation is only going to get worse. His view is that the government cannot play around with budget deficit and keep 'writing checks to all and sundry' and that it has to make those structural changes that are needed to avert the short term headwinds that will not go away without proper actions.
Others like Kumar took more charitable view. Kumar said that India has been running on all four cylinders for the past five years in terms of the economic growth and the good part of the story is that much of the growth has become self sustainable, more mature and sophisticated. But he felt that the bad part of it is that when anyone talks about a growth rate of less than nine percent, a lot of people feel sad.