By: Dr. Mike Campbell
India is one of the so-called BRICS group of emerging economies (Brazil, Russia, India, China and South Africa) and has enjoyed average growth of 7% in its GDP since 1997. By some measures (GDP purchasing power parity), the Indian economy ranks as the fourth largest in the world; by others (GDP per capita) it is languishing in 160th place – such is the joy of statistics. With an economy worth approximately $1.8 trillion in 2011, India is certainly an economic force to be reckoned with.
Data just released shows that the rate of expansion of the Indian economy is slowing. The GDP figure for the year ending in Q4 2011 came in at 6.1% compared to the same quarter twelve months earlier. This highly enviable growth figure, in western terms, was the weakest performance that India has seen in three years. Growth is seen as a casualty of India’s on-going battle with inflation which has seen the Reserve Bank of India increase interest rates several times to choke it off. The inflation rate stood at 6.5% in December, down from a peak of 16% in January 2010.
Manufacturing output slowed during the quarter to just 0.4%, down from 2.7% in the previous quarter. The decline was blamed on increased costs for both borrowing and raw materials. The nation is susceptible to shocks from the price of crude oil which has risen by almost 11% so far this year. If tensions between the western powers and Iran escalate over its perceived nuclear weapons programme, the oil price is likely to spike considerably higher.
India is the third largest economy in Asia behind China and Japan.