India's Economy Hits the Wall
Growth is slipping, stocks are down 40%, and foreign stock market investors
are fleeing. Business blames the ruling coalition for failing to make
reforms
by Manjeet Kripalani
Just six months ago, India was looking good. Annual growth was 9%, corporate
profits were surging 20%, the stock market had risen 50% in 2007, consumer
demand was huge, local companies were making ambitious international
acquisitions, and foreign investment was growing. Nothing, it seemed, could
stop the forward march of this Asian nation.
But stop it has. In the past month, India has joined the list of the
wounded. The country is reeling from 11.4% inflation, large government
deficits, and rising interest rates. Foreign investment is fleeing, the
rupee is falling, and the stock market is down over 40% from the year's
highs. Most economic forecasts expect growth to slow to 7%-a big drop for a
country that needs to accelerate growth, not reduce it. "India has gone from
hero to zero in six months," says Andrew Holland, head of proprietary
trading at Merrill Lynch India (MER) in Mumbai. Many in India worry that the
country's hard-earned investment-grade rating will soon be lost and that the
gilded growth story has come to an end.
http://www.businessweek.com/globalbiz/content/jul2008/gb2008071_743900.htm
