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What hinders India's economic growth

Last updated on: April 25, 2013 12:43 IST

What hinders India's economic growth

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Noted American economist Nouriel Roubini said India is not passing through stagflation but maintained that the prevailing conditions are "not ideal" for faster economic growth and cost of doing business is too high in the country due to "excessive levels of corruption".

"Inflation is high but the growth has slowed down. It's not truly stagflation but certainly the situation is not ideal," Roubini said addressing the 44th General Assembly of the World Trade Centres Association.

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Image: Nouriel Roubini.
Photographs: Reuters.

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Stagflation is defined as a period of low growth and high inflation.

According to him, high fiscal and current account deficits pose a risk to the Asia's third largest economy, which relies more on capital inflows to finance the high deficit in current account.

"There are many macroeconomic problems which the country has faced -- low growth, relatively high inflation, high FD (fiscal deficit), large CAD, currency depreciation...high inflation is a source of political and social instability and unhappiness among the population."

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Photographs: Reuters.
Tags: CAD , Asia , India

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Flagging concerns regarding high level of corruption seen in the country, Roubini he said this is negative for both consumers and business houses.

"Unfortunately there has been excessive levels of corruption in India and that can be a negative sentiment for consumers and for businesses. The cost of doing business is too high," Roubini said.

Roubini, who anticipated the collapse of US housing market and the 2008 worldwide recession, said scams are slowing down decision making and this is reflected in slow pace of infrastructure spending.

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Photographs: Reuters.
Tags: Roubini , India , US

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What hinders India's economic growth

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Talking about the recent slowdown in India's economic growth, he said while some of the factors responsible for the downturn were cyclical, some are structural in nature.

"There are significant supply side bottlenecks in many parts of the economy, China might have too many infrastructure, but India has too little infrastructure development," Roubini

said, adding that structural reforms have slowed down in the last three years.

Maintaining that economic growth of 6 per cent is not sufficient for India, Roubini said the country needs 7-8 per cent GDP expansion for reducing poverty and increasing living standards of its one billion-plus population.

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Photographs: Reuters.
Tags: Roubini , India , GDP , China

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He, however, noted that despite the change in Governments at the Centre, there is continuation of economic policies in the last 20 years.

"There is continuation of economic policies irrespective of which party or coalition is in power...for the last 20 years. Sometimes it has been faster, sometimes it has been slower, sometimes there has been reversal of decisions.

Most sides realise the direction of the Indian economy -- greater economic liberalisation." He pointed out that demographic dividend can work to India's advantage if productivity increases.

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Photographs: Reuters.
Tags: India

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Talking about international scenario, Roubini, who is Chairman of an economic consultancy firm, noted that emerging markets are going to drive global economy with higher growth rate.

"The rise of emerging markets is going to be one of the most important things driving the global economy. That's going to be very positive for the global economy," he said, adding that potential of GDP growth in emerging economies is 5 per cent higher than the developed countries.



Photographs: Reuters.
Tags: Roubini , GDP , India

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