Over the past two years, India
has weathered quite well the
perfect storms of rising oil prices, increasing food scarcity,
poor monsoon and the global crisis. It is now set to emerge second only to China
as one of the world's powerhouse economies. Top officials are increasingly
self-congratulatory about the growth trajectory of Asia's third largest
economy. Supported by the engine of domestic consumption and a tightly regulated
financial sector, India has become one of the most mature economies of
the world. Despite the adverse global economic conditions, the economy grew
by 6.7% during fiscal 2008-09, and it has accelerated to 7.2% in the fiscal
year 2009-10, driven by domestic consumption, vibrant private sector and
services led by high tech. According to the government sources, the economy
should expand by up to 8.75% this financial year to March 2011 and return to
pre-financial crisis growth levels of 9% thereafter, provided there is a
normal monsoon and the government undertakes sweeping reforms like abolition
of fuel subsidies and expansion of infrastructure.
Post-global crisis, India is the only country where industrial production
is above the pre-crisis peak. Industrial production recorded 10.4% in
August from a year earlier, while China's factory output rose 12.3%, the biggest
gain in 11 months. These trends indicate that the Indian economy is moving
towards the higher growth trajectory and has left the impact of the global
meltdown far behind. Finance Minister Pranab Mukherjee foresees
double-digit growth in the very near future. Under conservative assumptions,
the economy would be bigger than the UK's, in market prices, in a decade and
bigger than Japan's in two. The Economist Intelligence Unit (EIU), the research
arm of London-based The Economist magazine, anticipates India's growth to be
on an average of 8% in the next five years and overtake its neighboring
country China by 2018.
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