Home»Money»Special» Revealed: The Ten Big Challenges For The Sinking Indian Economy

Revealed: The ten big challenges for the sinking Indian economy

  • Bhaskar news
  • Aug 26, 2013, 13:35 PM IST
Revealed: The ten big challenges for the sinking Indian economy
+11
New Delhi: Despite that India’s Finance Minister and Prime Minister are economists, neither of the two is able to devise a formula to help the drooping Indian economy. Apparently rupee is sinking on an average rate of Rs 1/day. August 22 recorded so far the lowest ever exchange rate of INR at 65 against dollar. August 2013 has witnessed sharp depreciation in rupee. Indian rupee plunged 15% against dollar in July–August. As investors and traders are not sure about when US will start tapering its stimulus programme, nobody is certain as to what shall be the bottom price of rupee this season. Speculations are that if the pressure persists then rupee can breach the 70 mark soon.
 
The negative effect of a slumping rupee over the turbulent and much volatile markets’ last few trading sessions have perplexed the Prime Minister, the Finance Minister, the Finance ministry itself and the RBI Governor. All are pondering to device a scheme to rescue the national currency from going bad to worse.
 
The Finance Minister is reiterating and reassuring that ‘there is no need for excessive and unwarranted pessimism’ and that ‘we are in better health that many other countries’. Mr. P. Chidambaram assured in a press conference on Thursday that there will be an upswing in third and fourth quarters and that ‘the Indian rupee is undervalued’. Mr. Manmohan Singh also assured that there is ‘no chance of a throwback to 1991 balance of payments (BoP) crisis’.
Even though the current instability is temporary, the government reassurances are unable to provide any solace to domestic and foreign investors.
 
Let us now take a look at the 10 big challenges in front of the sinking Indian economy.
 
Click ‘NEXT’ for next slide

Find out more by clicking on the following slides

  • 2 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 3 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 4 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 5 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 6 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 7 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 8 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 9 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 10 of 11
    Revealed: The ten big challenges for the sinking Indian economy
  • 11 of 11
    Revealed: The ten big challenges for the sinking Indian economy
Widening Fiscal Deficit
 
There is a growing trade imbalance and imbalance between the Indian government’s revenue and expenditure. The foreign exchange reserves with the government are reduced to cater imports of not more than 7 months; however, during 2007-08 the reserves were enough to serve imports for one and a half year.
 
India’s fiscal deficit for the financial year 2007-08 was 3.5%, the figure shot up to 5.8% during 2011-12. India’s current account deficit (CAD) in the first quarter of 2013 was $9.95 million (Rs 44.69 crore), which is almost 50% of the GDP. The central government is committed to reduce it by 4.8% this financial year, which is a rare possibility. India's budget deficit in the third quarter of 2012–13 was 37.1% of the targeted.
 
The Reserve Bank of India (RBI) governor, D. Subbarao, while announcing 2013-14’s Credit and Monetary Policy, remarked that high CAD is the greatest threat to Indian economy. The deficit is at a historical high. CAD should be 2.5% of GDP, but is estimated to be at 5.2%. This takes a toll on the capital flow and triggers market instability. The government does not seem able enough to combat the national debt in the near future.
 
Click ‘NEXT’ for next slide

Stories You May Be Interested In

  • loader
    NEXT STORY