Since the Indian Rupee turned southwards, a lot of articles have started to crop up on how things are similar to what they were in 1998. 1998 was the peak of the Asian financial crisis when the rupee had come under pressure. The Reserve Bank of India (RBI) governor at that time had taken several measures including raising interest rates to arrest rupee's fall. At that time too India faced a slowing economy.
Jump to 2013, and things are eerily similar. This may make one get the sense of deja vu. As seen in the chart, the statistics show that at the moment things are actually worse than what they were in 1998. Barring GDP growth, which is expected to be around 5%, every other number paints a gloomy picture. Industrial growth has slowed down. The current account deficit (CAD) is worse. India's short term debt as a percentage of total debt has surged, which means repayments and interest would be a problem. Unfortunately because of the structural issues being faced on the policy implementation front, things are not expected to improve any time soon. At least on the domestic front. The export situation is no better either due to the depressed global economic scenario. Therefore unless the government can come up with some radical changes, the short term outlook for India is not very bright.
Jump to 2013, and things are eerily similar. This may make one get the sense of deja vu. As seen in the chart, the statistics show that at the moment things are actually worse than what they were in 1998. Barring GDP growth, which is expected to be around 5%, every other number paints a gloomy picture. Industrial growth has slowed down. The current account deficit (CAD) is worse. India's short term debt as a percentage of total debt has surged, which means repayments and interest would be a problem. Unfortunately because of the structural issues being faced on the policy implementation front, things are not expected to improve any time soon. At least on the domestic front. The export situation is no better either due to the depressed global economic scenario. Therefore unless the government can come up with some radical changes, the short term outlook for India is not very bright.
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| Source: The Mint |
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