India's economy slowing amid anger about corruption
MUMBAI: For much of the past month, India has been gripped by a raging public debate about how to tackle corruption, which is seen by many here as the country's most important challenge. But a slowing economy may soon overtake corruption as a more pressing problem.
On Thursday, for instance, as the Indian government negotiated with a fasting anti-corruption crusader, the country's central bank issued a blunt warning: Economic growth could soon fall below 8 percent.
Most countries would be thrilled to have a growth rate of more than 7 percent, but for India, which strode at a 9 percent pace before the financial crisis of 2008 and hit 8.5 percent last year, it would be a significant letdown. Slower growth would mean fewer Indians climbing out of poverty and could help spur greater social unrest.
And it would pose yet another challenge to the global economy, which is increasingly depending on emerging markets like India and China to make up for stagnation in the West.
The Indian slowdown was in the making long before most analysts were concerned about a double-dip recession in industrialized nations. Private investment has been sliding since late last year, once-robust car sales have decreased in recent months, and Indian stocks began falling in November and are down more than 24 percent from their high. Moreover, inflation has been hovering at nearly 10 percent even after the Reserve Bank of India raised interest rates 11 times in less than two years.
"Today, the economy is running on the engine speed achieved some time ago," said R. Gopalakrishnan, an executive director at the Tata Group, India's largest business conglomerate. Stressing that he was speaking for himself and not his company, he added, "It's not sputtering to an end, but it's slowing down."
The new economic worries are occurring while the Indian government has been preoccupied with the biggest protests the country has seen in nearly two decades.
The demonstrations are led by an activist, Anna Hazare, who has been on a hunger strike since Aug. 16. He says he will not eat until the Indian Parliament creates a powerful anti-corruption agency known as a Lokpal. His movement has gained a large following in big cities like New Delhi and Mumbai, especially among the middle class and the young.
While corruption, especially in day-to-day dealings between public officials and ordinary citizens, is the primary focus of most protesters, many of Hazare's supporters have also complained about high inflation and a lack of job opportunities. Some of them say corrupt practices have driven up the price of goods and services and distorted the economy.
"If the Lokpal bill passes, the economic issue will be good," said Sagar Bekal, a 25-year-old construction manager in Mumbai who has organized protest rallies for Hazare's group, India Against Corruption. "There will be a change - good social life, things getting much cheaper with corruption being curbed."
Such sentiments, analysts say, reflect the middle class' growing conviction that Indian leaders seem more concerned about reaping the rewards of economic growth for themselves than about improving the country. India has endured a series of large corruption scandals in the last year, involving the auctioning of wireless licenses, the 2010 Commonwealth Games and various real estate deals.
"People are so dissatisfied that they want a change," said Harsh Goenka, chairman of RPG Enterprises, a Mumbai-based conglomerate involved in several businesses. "They want a change in governance."
On Thursday, for instance, as the Indian government negotiated with a fasting anti-corruption crusader, the country's central bank issued a blunt warning: Economic growth could soon fall below 8 percent.
Most countries would be thrilled to have a growth rate of more than 7 percent, but for India, which strode at a 9 percent pace before the financial crisis of 2008 and hit 8.5 percent last year, it would be a significant letdown. Slower growth would mean fewer Indians climbing out of poverty and could help spur greater social unrest.
And it would pose yet another challenge to the global economy, which is increasingly depending on emerging markets like India and China to make up for stagnation in the West.
The Indian slowdown was in the making long before most analysts were concerned about a double-dip recession in industrialized nations. Private investment has been sliding since late last year, once-robust car sales have decreased in recent months, and Indian stocks began falling in November and are down more than 24 percent from their high. Moreover, inflation has been hovering at nearly 10 percent even after the Reserve Bank of India raised interest rates 11 times in less than two years.
"Today, the economy is running on the engine speed achieved some time ago," said R. Gopalakrishnan, an executive director at the Tata Group, India's largest business conglomerate. Stressing that he was speaking for himself and not his company, he added, "It's not sputtering to an end, but it's slowing down."
The new economic worries are occurring while the Indian government has been preoccupied with the biggest protests the country has seen in nearly two decades.
The demonstrations are led by an activist, Anna Hazare, who has been on a hunger strike since Aug. 16. He says he will not eat until the Indian Parliament creates a powerful anti-corruption agency known as a Lokpal. His movement has gained a large following in big cities like New Delhi and Mumbai, especially among the middle class and the young.
While corruption, especially in day-to-day dealings between public officials and ordinary citizens, is the primary focus of most protesters, many of Hazare's supporters have also complained about high inflation and a lack of job opportunities. Some of them say corrupt practices have driven up the price of goods and services and distorted the economy.
"If the Lokpal bill passes, the economic issue will be good," said Sagar Bekal, a 25-year-old construction manager in Mumbai who has organized protest rallies for Hazare's group, India Against Corruption. "There will be a change - good social life, things getting much cheaper with corruption being curbed."
Such sentiments, analysts say, reflect the middle class' growing conviction that Indian leaders seem more concerned about reaping the rewards of economic growth for themselves than about improving the country. India has endured a series of large corruption scandals in the last year, involving the auctioning of wireless licenses, the 2010 Commonwealth Games and various real estate deals.
"People are so dissatisfied that they want a change," said Harsh Goenka, chairman of RPG Enterprises, a Mumbai-based conglomerate involved in several businesses. "They want a change in governance."