India is heading straight for economic failure
post-Chidambaram's budget as a direct result of the lack of meaningful economic
reform, says Heritage Foundation, an important conservative thinktank in the
US. Assessing finance minister, P Chidambaram's budget, Derek Scissors of the
Washington-based organization said that it "leaves India on the same,
failing course it's been on of undisciplined spending and unrealistic
expectations".
The Indian economy is in dire health, he said, not
only because Indians' incomes have stagnated, income growth slowed and consumer
inflation is high, but because manufacturing that should lead the Indian
economy that would create jobs for the swelling ranks of young Indians is refusing
to take off.
"Services lead in large part because the labour
market is more flexible in services industries than in manufacturing. Rather
than labour market reform, the Indian government offers a state-led
infrastructure program. But the infrastructure program has no chance to succeed
while property rights to land remain so ill-defined," he explained.
According to him, India is making the same mistake
as the US like substituting spending since reform is politically difficult.
"The proposal for this year is a triumph of hope over courage: Spending is
to increase by 17%, yet the deficit is to fall to 4.8% of GDP. This won't
happen. Spending will have to be curbed or the deficit will balloon
again," he said.
The high growth between 2004 and 2007 was largely
due to the reforms of the years before. "Without a sustained reform
process, which will take considerable time, India will not return to the days
of fast growth. Government revenue and GDP will continue to disappoint,
deficits will continue to be high, and consumers will continue to suffer. This
is the path India remains on," he added.
Article Courtesy : TOI
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