Can India revive growth amid global slump?

NEW DELHI: The last day of 2011 ended on a worrying note for the global economy as Iranian oil minister Rostam Qasemi warned that oil prices could soar to $200 per barrel if the west imposes sanctions on Iran. The statement might be dismissed as hyperbole, but it added one more concern to a world already grappling with a slowdown and a crisis in the Euro zone — and would have surely been noted by Indian policymakers faced with the challenge of getting the engines of growth accelerating again in 2012.

International Monetary Fund head Christine Lagarde has already cautioned about the precarious situation. “The world economy is in a dangerous situation,” she said in a recent interview.

There is an overwhelming view that Europe must fix its problems and the world needs to provide a helping hand. The G20 must play a leadership role to restore the health of the global economy. There is also a broad consensus that efforts must be made to revive the Doha round of global trade talks by all the leading members of the World Trade Organization.

The Indian economy, too, faces huge challenges. Growth slowed from 7.7% in April-June 2011 to 6.9% in July-September , amid talk of policy paralysis. Getting the economy back on a high growth path is imperative. The budget for 2012-13 could provide a window of opportunity , though the surge in the fiscal deficit, from a projected 4.7% to a probable 5.5%, could act as a dampener.
Easing inflation silver lining

Govt Must Pursue Pro-Growth Policies To Check Sluggishness: Experts

New Delhi: The silver lining amid the clouds of gloom that are hanging over the Indian economy is that easing of inflation may provide headroom for the Reserve Bank of India to cut rates and help boost growth.

“2012 will be a challenging year. The outlook will be shaped by a variety of factors — some within our control and others outside our influence,” said D K Joshi, chief economist at ratings agency Crisil.

“The rifts in Europe and global commodity and crude price movements are outside our influence. But a fresh dose of reforms can partially cushion us against the global headwinds by boosting investor confidence,” said Joshi.

Economic analysts point out that India needs to pursue pro-growth policies with greater determination to kickstart the economy. Inflation may have eased but serious efforts must be undertaken to plug the supply side problems, while the talk of a second green revolution must move from the draw board to the fields. Restoring the health of public finances is another important area the government urgently needs to address.

And above all, constant vigil and greater harmony of ideas between RBI and the government will be needed to steer the economy through rough waters.