Crude realities for India’s economy
Only last year Indian policymakers were showing off the strong fundamentals of the economy to the world and pressing for a seat at the high table of global fora. Everything was going well — high growth, a surging stockmarket and a lot of attention from global investors attention.
But high oil prices and rising inflation threaten to bring the India growth story to its knees. Finance Minister PalaniappanChidambaram’s speech at a meeting of oil producing and consuming nations in Jeddah on Sunday showed the cracks in India’s confidence levels.
No doubt oil prices have spiralled, threatening the economic gains made by developing countries, as Chidambaram said in his speech.
But in the case of India was it misplaced optimism about growth or lethargy in getting the right policies on the ground that made things worse?
It pained me to read Chidambaram speech, in which he expresses “a heavy heart and foreboding” and says meeting India’s Millennium Development Goals had been imperilled by soaring crude oil prices.
But it is both a frank admission of the dangers facing developing countries, including India, and a fervent call for cracking down on speculators who, according to the minister, are playing havoc with the fortunes of nations. For the complete speech please click on
The Congress party-led government contains three key reformers — Prime Minister Manmohan Singh, Finance Minister Palaniappan Chidambaram and Deputy Chairman of the Planning Commission Montek Singh Ahluwalia — and it had four years to get things moving. But they appear to have succumbed to their communist allies on policies
and reforms that investors see as vital for India’s growth.
The oil surge and rising prices pose huge challenges for Indian policymakers. Strong measures will be needed. But will India’s leaders bite the bullet?