DTN News - INDIA ECONOMY NEWS: Struggling Coalition Leaves Indian Economy In The Doldrums


DTN News - INDIA ECONOMY NEWS: Struggling Coalition Leaves Indian Economy In The Doldrums


(NSI News Source Info) TORONTO, Canada - April 30, 2012: As India's once 'miraculous growth' story took a dark twist – Standard & Poors downgraded its outlook to 'negative' while Moody's blamed the ruling Gandhi family for the political paralysis behind faltering growth – the country's Met Office offered one silver lining. It ruled out the possibility that the monsoon rains would fail.


While Dr Manmohan Singh's government has lurched from one crisis to another and serious differences within his coalition have placed almost all reforms on hold, fear of a failed monsoon is the one thing which unites his fractious cabinet and Indian business leaders alike.
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In the past few weeks temperatures in New Delhi have plummeted, raising concerns that the searing heat and dust needed for a torrential monsoon will not come, causing crops to fail and inflation to soar once again.


If the weathermen's forecast is correct, India's problem remains a longer term one. How to revive a 'flagging' growth rate of 7pc back towards the double-digit figure the country had in its sights barely two years ago.


According to S&P and Moody's, the root cause of the disappointing performance lies in the country's government. S&P said last week that India's rating could deteriorate further if "the external position continues to deteriorate, growth prospects diminish or progress on fiscal reforms remains slow in a weakened political setting."


Moody's appeared to lay the blame for India's plight at the feet of the Gandhi family which controls the Congress Party, the leading group in the governing coalition. Sonia Gandhi and the party's heir Rahul Gandhi "blew their chance" to revive a programme of reforms in parliament by wasting their time campaigning in the Uttar Pradesh state elections, in which the party was humiliated and the government further weakened.


Prime minister Manmohan Singh had hoped to introduce a series of foreign investment and tax reforms to further open up the country's markets and make it an easier place for foreign and domestic companies to do business. But plans have been mothballed because the governing coalition partners cannot agree.


Plans to reduce government spending on fuel and other subsidies have been halted, while the widely quoted $1 trillion India must spend on upgrading infrastructure from roads to power plants has yet to leave the government's coffers.


A general air of gloom was compounded when the government's chief economic advisor Kaushik Basu warned a Washington think tank not to expect any reforms until a stronger government is elected after the 2014 elections. "We are going through a difficult year. (After 2014), you would see a rush of important reforms and after 2015 India would be one of the fastest growing economies of the world. The new government, if in a majority, would start with the reforms in a big way because there is a sense that it needs to pick up," he said.


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