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India’s Troubled Economy

As the government 'of India, the energies of s are absorbed in the debate over U.S.-India nuclear agreement (Agreement 123), the country' s economy is showing serious effort. India 's economy is now faced with the challenges of the trio – increasing oil prices, inflation and depreciation of disturbing Indian rupee. This is not good news for the country and not for the decision of the coalition of parties that have put all'elettorato in the next 8-10 months. Consider just some of the data. Inflation is at an alarming annual rate of 10-11 percent which corrodes the purchasing power of all citizens. The food and energy prices are going up sky high. India is seeking a consensus for a bandwidth of the adjusted price for oil. The currency of India – Rupee – is devaluing because of inflationary pressures. The trade deficit is growing. For example, Monday June 30, the market capitalization of the financial markets in India was around a trillion dollars. So was the size of the Indian economy. But on Tuesday 1 July that was not the case. Bombay Stock Exchange closed on June 30 with a market capitalization of about $ 1.02 trillion. On Tuesday, a fall of 500 points in the SENSEX and a gain of one of the 32 Indian paise (100 paise = 1 Indian rupee) for the dollar against the rupiah have seen that figure drop to $ 970 billion. Similarly, India 'gross domestic product s for 2007-08, estimated at 43.02.654 of crore Indian rupees (Rs), has resulted in just above $ 1 trillion as estimated exchange rate on June 30. With the dollar to appreciate against the Indian rupees and crossing the landmark of Rs 43 on 1 July, the economy was down to $ 995billion. The high oil prices have seen the importation of petroleum € ™ s of the bill Indiæ increased to $ 16.5billion in April-May this year, about 49 percent from the figure for the same months of 2007. As a result, the overall import bill increased by 32% to $ 48.8b. Despite the fact that exports will grow to 22%, the trade deficit rose to $ 20.6 billion – of about 48 percent. The enlargement of trade deficit has added to demand for dollars as compared to Indian rupees. So while the U.S. dollar is generally devaluing against most currencies, is appreciating against the Indian rupee. The exchange rate is more than 43 Indian rupees.

Gurumurthy Kalyanaram

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