November 23, 2015

The Biggest Problem for the Economy

The Indian economy is clearly not out of the woods. Over the last 18 months, the Modi government has initiated quite a few reforms. The intention continues to remain positive. Sadly, the speed of the reforms process has left a lot to be desired.

On the positive side, the fall in commodity prices has helped India a lot. Inflation is lower than what it used to be. Interest rates are falling. FDI flows have improved. The international narrative about India is still positive. Unfortunately, this will help beyond a point.

India' problem stemmed from a lack of trust by entrepreneurs to invest in the economy. This was partly because crony capitalists came under fire during the UPA 2 years. But mostly, it was due to multiple problems facing the economy: policy paralysis, corruption, labour & land issues, etc. Without investments on the ground, growth was bound to stagnate.

The reality today is the same. Investments have yet to pick up. 


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