The World Economic Forum – best known for its Davos shindig – has held a summit in Mumbai for the first time. The rhetoric from participants suggests the “India Shining” story is still burning brightly. But the refrain is failing to resonate. The numbers tell a different tale.
At the summit Mukesh Ambani, chairman of Reliance Industries and India’s richest man, said: “people think India is a land of billion problems. But India is a land of billion opportunities. India is ready to take off.” This mood was echoed by the Commerce Minister, Anand Sharma, and countless other speakers.
Examination of the Indian economy reveals a less rosy outlook – in the short term at least. A poll of more than 20 economists, surveyed by Reuters during October, showed that most had cut their growth forecasts. Admittedly, GDP will still expand at rates that much of the developed world can only dream about. But September industrial output numbers saw growth of just 1.9 percent year on year, the slowest pace in two years. The figures fell well below market expectations, too.
India’s fiscal deficit has pushed over 5 percent while its trade deficit widened more in October than at any time in the last 17 years. That adds pressure on the rupee, Asia’s worst performing currency this year. Inflation also remains around 10 percent in spite of 13 interest rate rises by the central bank over the past year and a half.
Ambani et al may be wary of criticising the New Delhi government in public, and that may explain why things are presented in such an upbeat way. Concerns were expressed – as is usual at such forums in India – about corruption and creaking infrastructure. But they don’t tell the whole story. Wide structural problems are impacting growth. The twin fiscal and trade deficits and persistently high inflation are concerns for Indian businesses.
While euro zone woe is the global pre-occupation at present, India has also lost its shine.