Indian Economy-Strengths and Weaknesses-VRK100-05Oct2011

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Please see update dated 01 September 2013:

http://ramakrishnavadlamudi.blogspot.in/2013/09/indian-economys-strengths-and.html

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Indian Economy-Strengths and Weaknesses

The Strengths are:

ü      Indian economy is driven by domestic consumption of late and is less dependent on exports as compared to other Asian nations

ü      Savings rate is very high at around 35 per cent (of course, the high savings rate is mainly due to the fact that common people have no social security)

ü      India’s population is very young providing good demographic benefits in the form of higher productivity and higher consumption of goods and services

ü      The level of entrepreneurship has gone up substantially after liberalization

ü      Indian banking system is very strong providing financial stability despite concerns about quality of assets of late

ü      India has vast natural resources

ü      India’s skills in export sectors – like, software services, engineering goods, gems & jewellery and garments – are well recognized across the world

ü      India has become a world manufacturing hub for automobiles

ü      Indian companies, in general, are in good health carrying huge cash balances and lower debt levels on their balance sheets

ü      If implemented properly, Goods and Services Tax will boost tax revenues

The weaknesses are:

Ø      Inflation remains persistent at around 8 to 10 per cent for about four years

Ø      Large price rise in food articles is affecting the poor people very adversely

Ø      Corruption is entrenched in the entire social fabric

Ø      India’s national income growth has slowed down due to rising interest rates, decline in investment cycle and gloomy global outlook

Ø      Fiscal deficit is getting out of control as the government is unable to control expenditure and resorting to higher market borrowings

Ø      Current account deficit is manageable now, but it may go out of hand in future if not handled properly

Ø      New project clearances are delayed due to environmental concerns and problems related with land acquisition leading to social unrest stemming from improper resettlement and rehabilitation

Ø      Despite huge population, there is massive skills deficit across industries

Ø      There is a perception that the government is unable to push economic reforms due to a spate of corruption scandals that surfaced recently

Ø      The micro challenges for India are healthcare, malnutrition, hunger, poverty and illiteracy

Ø      Hard infrastructure (roads, ports, power, broadband, etc) is very weak and energy security is poor

Ø      Low agricultural productivity – we need a second green revolution