Can India ever become a superpower?
In this issue:
» Is there another oil shock on the cards?
» Property developers in China facing tough times
» RBI cuts CRR by 75 basis points
» China's appetite for steel is reducing
» ...and more!
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A study conducted by the London School of Economics (LSE) does not think so. The LSE study which encompassed experts in the areas of India's economy, defence, government, culture, environment and society, advises caution in assessing India's claim to superpower status. It states that there are various hurdles which India still needs to deal with. These include the challenge of the Naxalites, the degradation of the once liberal and upright Centre, the increasing gap between the rich and the poor, the trivialisation of the media, the unsustainability of present patterns of resource consumption in an environmental sense, the instability and policy incoherence caused by multi-party coalition governments among others.
Some of these are certainly major issues. For starters, on the income front, although India continues to make headlines on account of a rise in the number of billionaires, it also ranks among the top slot in terms of those having high levels of poverty. Focus on caste continues to exist and there has been too much weightage given to caste politics as well. Then comes the issue of rampant corruption, the elimination of which seems quite a tall order indeed. Security is also an issue.
However, all is not lost. Superpower or not, India still has tremendous scope to grow and the quality of many of its companies is still superior to that of China. What the government needs to do is focus on reforms that will bring in investments and create a climate for sustainable growth in the future.
Do you think India has what it takes to become a superpower going forward? Share your comments with us or you can also comment on Facebook page / Google+ page.
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Chart of the day | |
Data Source: The Economist |
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Tight liquidity was the major reason for the central bank's timely move. This CRR reduction is expected to inject around Rs 480 billion of liquidity into the banking system. This will provide the much needed relief given that advance tax payments are expected to be around Rs 400-600 bn. Credit demand is also expected to pick up towards the end of the fiscal as banks try and meet their year-end targets. The RBI is clearly worried about the slowing growth and tight liquidity. We await the next policy review to unearth more details on its future outlook.
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Another risk is the Euro zone's reluctance to loosen monetary policy further in response to the sharp hikes in crude prices. This could easily derail its attempts at economic recovery and also perhaps push the entire global economy on the edge of a cliff. Then there is the biggest cat in the bag we believe. The US of A. It is imperative that the leadership of the country keep a calm head in the event of a price rise. Taking actions like cutting petrol taxes and releasing strategic reserves may certainly help in the short run. But it will do no good in the longer term scheme of things. Thus, as the Economist points out, odds of averting a 2012 oil shock depends mainly on the US keeping its cool. Any signs to the contrary and we could be asking for trouble.
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Now there is some bad news. It is expected that Chinese steel demand would slow down this year. This is on the back of waning construction activity in the country. Even last year steel demand had grown at a modest pace of 8%. A Chinese industry body fears that this year the same could go down to 4%. What will be the consequences of this slowdown? It will certainly hurt a lot of iron ore miners and steel producers as lower demand will also accompany prices falls. Coking coal prices will also come under pressure. But apart from the bad news, there may be some relief as far as commodity prices are concerned. If that could ease inflationary pressures in India and reverse the interest rate cycle, our economy would certainly get lifted out of the lull.
04:16 |
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The Indian stock markets were down by 0.8% after witnessing high volatility during the week. Markets see-sawed on the repercussions of key events like election results and Greece rescue plan that culminated during the week. Further, in an unexpected move, at least in terms of quantum, the Reserve Bank of India (RBI) cut the Cash Reserve Ratio (CRR) by 75 bps on Friday. The move will inject Rs 480 bn into the system. Unexpected rate cut is expected to drive the markets next week. Further, with the Union Budget 2012-13 scheduled to be announced on March 16, next week's session is expected to be equally volatile.
Amongst the other world markets, Japan was the only one to close in the green. France was down 0.4% while Hong Kong was down 2.2% during the week.
Data Source: Yahoo Finance |
04:50 |
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12 Responses to "Can India ever become a superpower?"
Vijay
Mar 10, 2012It surely can only if there is a political will to administer the required changes which is known.