|»5 Minute Wrap Up by Equitymaster|
On This Day - 30 APRIL 2011
The biggest possible barrier to India's growth
In this issue:
Is it better to invest in gold or stocks? ...
'Gold Bug' Bill Bonner, answers these questions for you in the exclusive publication - The Guide to Gold
Yet, this picture completely belies the state of affairs in India's rural hinterland. There, India's stupendous GDP growth has not made any marked difference to their standard of living. Poverty in these regions continues to remain a disease and highlights all the more the big economic and social divide in the country. One of the reasons that has made India an attractive destination is its so called demographic dividend. The idea is that the young working population will go a long way in bolstering India's growth in the coming years. But there is the other side to the story. One where India needs to actually find meaningful and gainful employment for its ever increasing population. That picture does not look very encouraging.
Take the Mahatma Gandhi National Rural Employment Guarantee Scheme for instance. This is a US$ 9 bn programme designed to create jobs through building infrastructure in a developing India's most-backward rural areas. But it has not really seen the success envisaged largely due to corruption. There are also complaints of new skills not being learnt which would enable workers to garner better jobs and improve their chances of lifting themselves from poverty.
Indeed, India's metros have seen remarkable progress and have led to the rise of the middle class whose standard of living has improved along with the country's growth. But this difference has to be felt in the rural areas too. Especially since it accounts for two thirds of India's 1.2 bn population. Otherwise, India will have to deal with increasing social unrest, which will surely thwart its attempts to take growth to the next level and discourage foreign investments.
* Commercial Vehicles (Medium and Light)
# Utility Vehicles;
Data Source: SIAM
Firstly, the near zero interest rates have been fueling asset prices across the world. Gold, silver, oil have all hit record levels. It has also pushed up inflation in emerging economies like India and Brazil, forcing these countries to either raise interest rates or to limit capital inflows.
Secondly, a weaker dollar makes imports, including oil costlier for US consumers. Higher input and borrowing costs could hurt demand and economic growth. Either way, the Fed and the US government needs to take a long, hard look at its problems. It needs to slash its bourgeoning budget deficit, and increase interest rates. If things continue the way they are currently, the US will have a long, rocky road to climb back into recovery.
The picture is not all that bright though. As per this study, rural households that access PDS (public distribution system) have declined by 10%. However, the government figures reflect a PDS food grain off take of 90%. This points to the diversion of PDS food grains to open markets despite strict laws in place. Nonetheless, the outcome of the survey comes as a breather. Hit by a slew of corruption scams, the timing for an image makeover for India could not have been better.
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