Indian economy not in stagflation; graft a concern: Roubini


Noted American economist Nouriel Roubini the

said India is not passing through stagflation but maintained that the prevailing conditions are "not ideal" for faster economic growth and cost of doing business is too high in the country due to "excessive levels of corruption". "Inflation is high but the growth has slowed down. It's not truly stagflation but certainly the situation is not ideal," Roubini said addressing the 44th General Assembly

Stagflation is defined as a period of low growth and high inflation. According to him, high fiscal and current account deficits pose a risk to the Asia's third largest economy, which relies more on capital inflows to finance the high deficit in current account. "There are many macroeconomic problems which the country has faced -- low growth, relatively high inflation, high FD (fiscal deficit), large CAD, currency depreciation.... high inflation is a source of political and social instability and unhappiness among the population."

Flagging concerns regarding high level of corruption seen in the country, Roubini he said this is negative for both consumers and business houses. "Unfortunately there has been excessive levels of corruption in India and that can be a negative sentiment for consumers and for businesses. The cost of doing business is too high," Roubini said. Roubini, who anticipated the collapse of US housing market and the 2008 worldwide recession, said scams are slowing down decision making and this is reflected in slow pace of infrastructure spending. Talking about the recent slowdown in India's economic growth, he said while some of the factors responsible for the downturn were cyclical, some are structural in nature. "There are significant supply side bottlenecks in many parts of the economy, China might have too many nfrastructure, but India has too little infrastructure development," Roubini said, adding that structural reforms have slowed down in the last three years.

AMJAD KHAN
PGDM 2ndSem