Finance, Forex and Investments

Why is India worried about its economy?

Countries like USA, France,Japan and UK are crackling into recession with negative GDP growth. Whereas in case of India, it is just a slowdown from 9 pct to 7.9pct Why should India be worried about this "slowdown" Anyhow it is growing at fast compared to other economies right?

Public Comments

1. i thought every country is worried of its economy? It's a chain reaction,this global recession affects every nation. India is worried cos now that they've accelerated in their economy growth, the world economy is in recession..
2. India's racing economic growth has hit some roadblocks. Interest rates have been raised, repeatedly, yet inflation continues to run high, raising fears that the economy is overheating. Raghav Dhir took out a 50,000 dollar loan, last year, to buy an apartment in New Delhi. Property prices were soaring as the economy boomed, but low interest rates prompted 32-year-old Dhir to make the purchase. But his plans for more spending have been put on hold. Dhir's mortgage payment has jumped more than 20% after three interest rate increases by the Central Bank in the past six months. Dhir says the higher monthly payment he has to fork out is beginning to hurt despite his recent salary raise. "I thought I would buy a new car as well, but I have postponed plans for that." Expanding incomes for India's growing middle class have stoked a consumer boom and led to surging demand for everything from cars to homes in the past several years. But rising interest rates have dented the optimism of the middle class. At the same time, consumer prices are touching new highs. Concerns are growing that India's economy is showing signs of overheating: high growth coupled with high inflation, and a currency that is rising in value against the dollar. Economists say the Central Bank's interest rate increases are aimed at cooling the economy by limiting the flow of easy credit. The Central Bank also wants to stabilize prices that affect the poor, such as food costs. But business leaders are concerned that the monetary tightening will slow down an economy that has been gaining more than 8% annually over the past four years. The chief economist at the Federation of Indian Chambers of Commerce, Anjan Roy, says a recent survey reveals that business confidence is a little bruised. "Rising interest rates will hurt industry. Industries which are interacting with consumers, their confidence level is going down. If interest rates are going up, then house purchases will go down." The automobile industry and the banking sector also could be hurt as consumers cut back on buying expensive items on credit. Automakers say car sales already have hit a 13-month low. Companies warn that profit margins are getting squeezed as the rupee sits at a nine-year high against the dollar. In just a year, the Indian currency has appreciated by more than 13% versus the dollar. In addition, high property prices and massive wage increases are making new investments for industry more expensive. P.K. Chaudhury is managing director of the Indian Investment and Credit Rating Agency, known as ICRA, in New Delhi. He says the rising rupee is being watched closely by India's services industry. A strong rupee means Indian goods and services are more expensive to foreign customers. "Substantial growth is dependent on services sector like information technology sector, and there the invoices are mostly dollar denominated, and U.S. in major partner, and that is major cause of concern. What they are trying to do is, they are trying to improve on their productivity."
3. every country in the world can't survive independently. bcz each country depends on one another for its growth and survival.....it is due to each country is not equipped with all resources it has to depend on one another for their needs......so there is a chain of this relation...if one country is in recession the another will also face.... example. if one country is importing from another so bcz of recession it may not want to import the things thus it affects the economic scenario of exporting country
4. India is worried about a recession in other economies because all economies are related to each other. So, if a huge economy like US goes into recession, many economies will be hit hard For example: India exports a lot of handicrafts to the US. If the US economy goes into recession, the consumer spending there will experience a slowdown. If consumers stop purchasing Indian handicrafts, Indian exports will be hit and this will have an impact on the 'money inflow' into India and all this will affect the Indian economy.
5. Well, it's too early to tell. That's why it worrying India. Once the recession really hits the core of US economy, many more countries that are too dependent on USA will experience a higher decline in GDP growth. Part of India's worry is the incoming president, Obama. IT is a big contributor to India's GDP, and with obama at the helm in January, he might just have policies that would greatly affect india.
6. They should be worried. They exemplify a country that always believed in extreme wealth alongside extreme poverty. We can see that this is the very attitude causing all the problems. When the majority of people don't have money to buy the products, all companies and countries fail. Justice promotes the free market. Without it......bye.
7. You are partly right as it's Indian exporters who shall be mainly affected by the slow down in USA.In case of financial markets,issues are more intricate and the heavy cross investment would affect India adversely.
8. Your question is very apt. But check the list of countries that u mentioned with that of INDIA. USA, France,Japan and UK are all DEVELOPED NATIONS. India is still a developing Economy. India is facing some serious liquidity issues due to heavy FII outflow. Investment sectors especially Equity Markets are facing the crunch. The withdrawal of funds from the Indian Equity Market is resulting in Sensex and Nifty fall. Result: Domestic Investor Confidence gets low,people start pulling out funds from the capital segments. The slash in Interest Rates, Repo Rates, Bank Rates are indicators of liquidity dry up catching up faster in India. India is on its crucial stages of Development, Infrastructure, FDI, and Real Estates are its prime resources. Given the huge population of India, it cannot afford to lose out on any of its prime resources, if it has to achieve a decent sustainable growth figure. The slump in GDP is not a good sign for a developing nation like India, India's target to become a Developed Nation is yet to be achieved.Indian Consumption Expenditure even today overrules the Income Factor. Hence even a slight slow down at the current stage, would mean distraction from the path of sustainable development for India.