Bears circle India's slowing economy
NEW DELHI — Not long ago it was the toast of investors, but India's appeal has taken a hit, with bearish sentiment building thanks to worries over stubbornly high inflation and…
NEW DELHI — Not long ago it was the toast of investors, but India's appeal has taken a hit, with bearish sentiment building thanks to worries over stubbornly high inflation and widespread political corruption.Investor ardour for Asia's third-largest economy has been cooled by a litany of bad news, from slowing growth, rising prices and spiralling interest rates to paralysis on economic reforms and a string of high-profile graft scandals.Last week, global business information agency Dun and Bradstreet reported that its India business optimism index had fallen by a hefty 22 percent quarter-on-quarter."There has been a confluence of bad news dragging down sentiment," Kaushal Sampat, Dun and Bradstreet's India chief executive, told AFP.The bad news comes as the government battles multiple corruption scandals that forced the resignation of a second cabinet minister last week over accusations he abused his power while he held the telecom portfolio."There are so many political fires, it makes it hard for the government to focus on the economic challenges such as reforms needed to spur growth," says Sampat.Data for the January to March quarter showed annual economic growth of 7.9 percent -- the slowest in five quarters. The key manufacturing sector grew by 5.5 percent, its weakest pace in 18 months.Quarterly net direct tax collections have fallen 17 percent year-on-year as economic activity decelerates.Economists blame the downturn on stubbornly high inflation, which 10 interest rate hikes since March 2010 have failed to tame. Price pressures are now spreading from food and energy to manufacturing."The continual rise in credit costs and high inflation have hurt both investment and consumption," says Deepak Lalwani, head of London-based India-focused investment consultancy Lalcap.Factory output has slowed in both India and China, the fastest-growing major global economies, as central bankers have boosted lending rates to fight inflation.As one sign of waning investor appetite, funds raised through initial public o
last modification 2011-07-10 09:45:10
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