Wednesday, April 15

Hoping for a crisis to reform!

Ajay Shah' in this article: India in the Great Recession points out the industrial production growth is at its worst levels since 1993. In addition capital inflows are down, tax collections are down.

Yet private investments have been surging and today constitute a larger piece of the pie, compared to government and household sector, are also the most volatile.

According to Ajay any reversal in private investments, which is likely given the drop in production, could tip India into downturn similar to 1992-93. And given the weak state of fiscal and monetary mechanisms to counter the downturn, we could be in quite a "spot".

Given the surging private investments, Ajay Shah is almost hoping for a crisis that would kickstart the necessary reforms just like in 1992.

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