India to the rescue?
June 21, 2012
A lot of people inside and outside of India, said an Indian TV presenter, are rubbing their eyes and wondering: Does India really have $10 billion to give away? Economic growth in India has slowed and the country has many troubles of its own to deal with, not the least of which are urgently needed reforms to combat poverty, improve healthcare and open the job market.
India is hoping that Europe recovers quickly from its debt crisis because it needs the continent's markets to keep its own economy chugging along. Some 300 million people in India live on less than one dollar a day and any dip in economic growth sets back efforts to cope with the country's problems, said the head of an employment referral agency in Mumbai.
"We have been feeling the global slowdown for six months; especially in the industrial sector. We usually refer about 150 people a month, but now, that is down to 50 to 60," he said.
European slowdown worries India
For more than six years the Indian economy grew a reliable nine percent per annum, but for the last half year that figure has remained out of reach. The stone around India's neck is called Europe, says Kaushik Basu, a business consultant for the Indian government.
"Europe will continue in these rough seas for another two and half years, and nobody, with the exception of North Korea, is water-proof to what happens," he said.
Basu, who despite the crisis has obviously kept his sense of humor, openly admits that India itself is responsible for much of its own malaise. An inflation rate around 10 percent is a severe strain on the poorest of the poor, he says, and economic reforms are urgently needed.
"The next six months will be crucial because reforms need time to work," he said.
India also to blame
The problem, he went on to say, was that the Indian government at the moment appears to be consumed with trepidation. It seems to be completely timid and unsure of itself, especially in light of its recalcitrant coalition partner. But, despite it all, Prime Minister Manmohan Singh did not mince words at the G20 summit in Mexico, telling German Chancellor Angela Merkel that he was not pleased with the tactic of sticking to budget discipline in light of the crisis, when the goal was to get economies back in gear.
"Let me address Europe with a bit of advice. I am more and more of the opinion, as are other economists, that Europe needs a few bouts of inflation. Europe needs 1 to 2 years of inflation so that this enormous burden can be reduced. And then, it could tackle the other necessary changes," Basu said.
India can still hold its head up high after years of accelerated growth. Among the G20 nations, only China and Indonesia have enjoyed a better run.
"India will turn itself around. And not just that: in a few more years it will take the lead among the growth nations of the world," says Basu.
However, if the crisis lasts longer, the less convinced voices will grow louder. What will happen in a few years, they ask, when India has a hyper-rich upper class, but beneath it, millions and millions of well-educated young people may not be able to find a job? This, they worry, could shake the very foundations of the rising Asian powerhouse.
Author: Kai Küstner / gb
Editor: Sarah Berning