Here is a critical take on the Indian economy by world’s most respected magazine The Economist.

The magazine says India’s economy is overheating and it cannot sustain the frenetic growth it currently is experiencing. It says: “...things are so hot there is a big problem: India’s current pace of expansion may not be sustainable.”

The magazine says that the “economy is displaying alarming symptoms of overheating. This implies that demand is outpacing supply and hence the pace of growth is unsustainable”. One of the signs is that despite lower oil prices, wholesale-price inflation has risen to 6 per cent. The magazine adds: “Perhaps the only thing really growing faster in India than China is hype.”

In my opinion, there are certain areas like real estate where a bubble is seen, but it’s not time yet to write off India.
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  • Dear

    Can you give us more information in same line

    Thanks
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  • The magazine adds: “Perhaps the only thing really growing faster in India than China is hype.”


    True....Indian real estate market has gone up drastically in the past 2-3 years. I doubt one will see the same returns in real estate what we have seen in the past 2 years.

    Moreover, the "HYPE" couldn't sustain any country's economy much longer, infact in reality investors feel apprehensive to invest in emerging countries like India , its still developing and single country investments (especially emerging countries) are risky. (The release of REMFs and how much FIIs invest in it could probably speak the true state of same..)

    *what it requires are few Corrections to bring the market in equilibrium state and out of hype as well.
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  • The Indian economy is overheating, with inflation going up (6.6 per cent), high credit growth (over 30 per cent), high capacity utilisation (over 90 per cent), a lack of infrastructure and high fiscal deficit. This leads to fears of rising interest rates. Together with reports that the government is considering raising short-term (i.e. over a year) capital gains tax rate from the current 10 per cent to 15 per cent, this means that the flow of money from bank deposits into equity markets may reduce.

    Banks like ICICI Bank have hiked home loan rates by one percentage point and also deposit rates, though public sector banks are not hiking home loan rates in deference to the wishes of the Finance Minister.Net net, given that India continues to grow healthily and the politicians haven’t yet made a right royal mess of things, the India story will continue to attract funds and the bull will continue to run with the occasional pauses for breath.
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