By Yash Sood
London-based economic consultancy Centre for Economics and Business Research (CEBR) has recently suggested that, by 2028, India would be the third largest economy behind China and the United States. But, the past year hasn’t given any hints that this will be happening anytime soon.
2013, in most ways, was not a good year for the Indian economy. Everything began well with the Finance Ministry in February stating that the growth rate during 2013-14 would improve to 6.1-6.7%, from decade’s low of 5%, recorded in the previous fiscal. As the year progressed, rising inflation, mainly due to the rising prices of essential food items and the value of Indian rupee against the US dollar falling to an all-time low, the growth rate slipped and during the April-September period, it was recorded at 4.6%. Finance minister P Chidambaram as well as RBI governor Raghuram Rajan continuously, yet unsuccessfully, tried to assure the industry as well as the people that the growth rate would be above 5% and would not fall below the decade’s lowest level witnessed last year. The government made desperate attempts to stem the tide with a host of innovative and traditional measures, but they all were in vain.
At the start of the year, institutions such as IMF, World Bank estimated the country’s growth rate at 5.7% and 6.1% respectively, but that was lowered to 3.75% and 4.8% respectively during the latter part of the year. Also, as a result of the sliding rupee, Canada overtook India to retake its position as the 10th largest economy in the world.
With currency depreciation seen and many measures taken by the government, growth is forecasted to be 5.1% in 2014. However, one event that will determine the story of the Indian economy is the result of the coming general elections. A stable government after the elections will prove helpful. It is expected that 2014 would be the year, when our economy will grow faster than any one could have imagined and we will be considered able to be at par with the likes of China, US and other countries from the West.
One of the most important changes for this to happen is growth of GDP at a much higher rate. The current account deficit (CAD) which increased tremendously during the year 2013 will fall, according to the C Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council. The value of gold imports is expected to be higher, while the vegetable prices which led to inflation in the previous year is expected to lower, thus resulting in food deflation. One can see that prices of onions and other vegetables have declined in recent months. Sliding growth, rising inflation as well as sliding value of rupee marked the year 2013 which the country’s managers would like to forget quickly in the hope that 2014 would bring an improvement in the country’s fortunes.
However, whether 2014 will bring an improvement in India’s economy, or whether our economy will continue to progress at snail’s pace remains to be seen.
