Wednesday, August 22, 2012

Internal consumption will be the key driver

Faced with the rising fiscal deficit & inflation, it will be a challenge for policymakers , both on the economic as well as political front, to spread the economic benefits

Indian economy’s 7% average growth since the beginning of this millennium has surprised many. A truly miraculous journey, India has been treading its own distinct path, and an unparalleled, non-replicated model unseen elsewhere.

Unlike its Asian peers that followed low-cost, low-technology, labour-intensive, export-led manufacturing growth, India grew out of its technology enabled services. A huge demand for services and products by its young and growing middle class population drives a strong internal consumption economy, along with high domestic savings rate. And a big government spending on developing infrastructure completes the script for long-term continuous growth story. Also, the vibrant “rural economy” brought some insulation from global turmoil. Datamonitor estimates that the domestic consumption makes upto three-fourth of India’s GDP.

An enterprising populace will keep firing the economic engine. The country’s agriculture, its largest labour-oriented private enterprise, the small traders and a large self-employed workforce will bring greater economic resilience. India’s socio-political setup and its long democratic tradition binding its pluralistic society enable it to grow with such diversity, unlike other societies with vastly homogeneous population. However, internal security concerns arising from Maoist activities and terrorism still pose a threat to its united fabric.




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