A Year that showcased India’s Economic Strength-2009

World of Finance by M.Vijaya Sai

After several years of rapid growth, 2009 will prove a testing year for India. Since the whole world is in trouble with a deep recession, huge economic drop and other financial crisis we suffer a lot from problems. Even though at end of the 3rd financial quarter it show a good sign of recovery in every sector but comparatively with world developing economies we are falling down.

That is Chain’s exports growth at December is 17.7%
India’s exports growth at December is 15%
Like this we are back at some places but overall we gain more than we loose.

The various we gained are as follows:

Inflation:

Inflation continues to pose a threat. Inflation peaked at 12% in early August ‘08. Inflation is being caused by rapid growth (demand pull factors) but, also the cost push inflation factors (rising oil prices). Hopefully, the fall in oil prices and higher interest rates will reduce inflation without causing too much of a slowdown.

Economic Growth:

After reaching growth of 9.8% in 2007/08, growth is expected to slow down to 7%. This might not be a bad thing as it will avoid inflationary pressures building further. However, some worry the global credit crunch could reduce growth much more.

Global Recession and Indian Economy

It appears that Europe, Japan and the US are entering into recession. Falling house prices, crisis in the financial system, and lower confidence could lead to a sharp downturn, with the worst still to come.

Many argue that India’s growth is not so dependent on growth in the West. However, the Indian stock markets have been hit by the global crisis. India’s growing service sector and manufacturing sector would be adversely impacted by a global downturn. However, I still feel that India’s economic success is not dependent on growth in the West, and at worst India’s growth rate will be less than hoped for. The Indian governments still have a target of 10% growth for 2010/11, but, I think this could prove unrealistic.

Challenges for Indian Economy in 2009

1. Getting inflation under control
2. Spreading the benefits of growth more equitably.
3. Completing investment projects which are essential for long term development of economy.
4. Dealing with global financial uncertainty, which will make capital flows and exports more difficult.

Sensex in 2009

After falling in 2008, the Sensex could offer one of the best returns for global stock markets. India’s strong economic growth will buck the global trend for lower growth.

Indian Rupee 2009

The Indian Rupee has had a surprisingly weak year. The Rupee has fallen from 39 Rupee to 1$ in January 2008, to 44 Rupee in September. Real interest rates in India are still negative, but, if the Indian inflation rate is reduced, and the government resists the temptation to go all out for growth, the Rupee may rebound, at least against the dollar, which will face more difficulties in 2009.