While the global economy has suffered many setbacks in the last two years, the economy of India is starting to grow at a record pace. While stuck in economic doldrums this same time last year, Asia’s third largest economy has witnessed an 8.8 percent growth in the June quarter.
While there are many factors which have helped this number soar, economists have looked at the farming and manufacturing output as the leaders in this positive news. While not known for their strong farming output, India has evolved into a force in the global farming industry.
In recent times India has been caught in what experts coin the “Great Recession”. In this recession, India, like many other countries, suffered economically on all fronts. Prior to the “Great Recession”, India experienced a growth rate of nearly 9 percent. With these past numbers as indicators of the economy, today’s numbers represent a great deal of hope for the country and the global economy as a whole.
In a bid to tame inflation, the Reserve Bank of India has raised key interest rates four times in the past year with the hopes of taming high inflation. While these attempts have been valid, economists claim these hikes have yet to filer out to the real economy.
In analyzing the numbers we see that quarterly manufacturing output surged 12.4 percent coupled with record auto sales in July. With this news, economists say consumer demand remains narrow and the shadow of global economic uncertainty is constraining capital spending and could have an adverse affect on credit growth and industrial production.
One renowned leader among economists is Shubhado Rao. When asked his thoughts on this report, Mr. Rao was quoted as saying, “Global uncertainty has taken a toll. The most important factor is not interest rates or availability of funds. It’s got to do with confidence. Every two months, you’re seeing a spate of bad news. Industrialists with big investment plans would “rather wait and watch” in that environment.”
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