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Ila Patnaik
Finance minister Pranab Mukherjee has laid to rest speculations about India imposing capital controls in the face of rising capital inflows. In a recent statement, he clearly said that while the government would monitor the inflows, India is not planning to impose restrictions on capital...
The most striking move by Indira Gandhi, before the declaration of the emergency, was a mid-night ordinance in July 1969.
RBI governor D Subbarao has hinted at a rate increase sooner than that in developed countries. At the same time the Reserve Bank of Australia raised interest rates.
Signs of recovery are visible in nearly all the macro economic indicators that we monitor. Industrial production, imports, exports and credit conditions have improved in the most recent data.
India has seen greater integration with the world economy through trade in goods and services, and through financial integration, over the past two decades.
Earlier this week, the government released exports data. As usual, the official press release emphasised the year-on-year growth rates. This measure gave a wrong signal.
In this business cycle downturn, the Indian economy consequently, is now a demand constrained economy. The sharp fall in external demand, the decline in investment demand, and the decline in corporate sales indicate that private demand has shrunk.
A delay in the monsoon is always painful. This time it has come at a time when the economy is already in the midst of a slowdown. However, fortunately, in the last 15 years, the resilience of the Indian economy to the monsoon has increased.
Capital flows are returning to India. The revival, after the sudden stop witnessed last year, appears to be strong and sharp. As market conditions in global financial markets have improved, and confidence has returned to markets, India has started witnessing a return to capital flows.
