India: Its Growth Dynamics

Dismissing fears of global financial contagion impacting India, the International Monetary Fund has said that the country's economy will continue to perform well. According to Oliver Blanchard, Economic Counselor and Director of International Monetary Fund (IMF) Research Department it seems that overall, the Indian economy is going to continue to perform well.

According to the projections made by the World Economic Outlook (WEO) released recently by the IMF, India is likely to register a Gross Domestic Product (GDP) growth of 7.9 per cent in 2008-09, which may slip to 6.9 per cent in 2009-10. It is projected that the growth in India will come down from eight per cent in 2008 to seven per cent in 2009. But seven per cent is still a strong rate of growth as per IMF officials. A likely seven per cent growth rate at a time when the world economy is on a downhill path, would reflect India's internal growth dynamics.

Giving reasons for relatively mild impact on India of the ongoing financial turmoil, Blanchard said, "India is still largely a closed economy, has strong internal growth dynamics, from rapid productive growth, from its process of integration into the global economy that is still continuing".

India has registered a growth of nine per cent during 2007-08 and according to Prime Minister Manmohan Singh it is likely to register a growth of 7.5-8 per cent during the current financial year.

Now We Need Him More Than Ever Before

Mohandas Karamchand Gandhi (aka Mahatma Gandhi) is probably the rarest among all those personalities who is loved the most as well as criticized the most. Though he virtually enjoyed a unchallenged position during India's freedom struggle, his economic formulations failed to impress us - even his closest confidants (J.L Nehru & J.P Narayan).

Gandhiji felt that the key to the country's progress lay in the strengthening of the decentralised, self-sufficient village economies. Fundamentally Gandhi opposed machinery because he thought it displaced labour and it concentrated production and distribution in the hands of a few. This is an old question in classical political economy with which Ricardo grappled at length.

The "Gandhian Economics" enlightens us as to how development choices should be made keeping in mind the poorest and the weakest and further recommends that while the basic needs of all people should be met, there should also be consciousness regarding placing a limit on consumption. Probably this was the principle that even "Buddha" preached thousands of years ago.

We more often confuse Economic Index with Happiness Index. One may be poor yet remain always happy. Contrarily, a rich man may not necessarily be happy. Those who view and evaluate "Gandhian Economics" from materialistic level may not get impressed with its philosophy but the kind of real challenges a developing country like India faces, it is only Gandhian responses which can help us out. We should not continue to make the mistake of falling into trap of IMF/World Bank loans and MNCs Foreign Investments and live in a virtual world but instead adopt "Gandhian Economics" and live in real world.

Will International Donors Open Their Wallets for Zimbabwe?

After much political unrest and severe economic crisis Zimbabwe’s political rivals finally appear to have found common ground. At the end of the long negotiation talks held between President Robert Mugabe and the leaders of opposition, they have agreed to a power-sharing deal. This could be a sigh of relief for the teeming millions of Zimbabwe who have been subjected to the political and economic crisis for years together. But, it is still not clear how Zimbabwe’s political arch-enemies will manage to work together.

Will this be good enough for international donors to open their wallets? Zimbabwe badly needs outside help. The central bank has failed to rein in hyperinflation—now officially over 11m% but in reality probably over 40m%. So devalued is Zimbabwe’s currency that the bank was forced to announce this week that it would allow some shops to trade in foreign exchange. Farming and manufacturing have collapsed, and shortages are crippling. Some 2m people urgently need food handouts, a number likely to swell to 5m by early next year.

To mention recently Zimbabwe had to take a loan of US$300 million from South Africa to pay the IMF. The load alone is not enough and Zimbabwe will need much more financial help from its Asian allies to ward off a total collapse. The often-violent seizure of thousands of white-owned farms for redistribution to black Zimbabweans, combined with years of drought, has destroyed the country's agriculture-based economy. Inflation has soared to 164 percent, and Zimbabwe is also suffering critical shortages of food, fuel and foreign currency.

We have to wait until Monday (September 15, 2008) when the details of the agreement will be made public. Our eyes would be on the economic policy changes that would be taken up after this power-sharing to counter the economic downturn in the country.