Financial growth in India

Financial growth in India

According to the latest feedback from financial analysts, economic growth in India is on the up. Things have not always run so smoothly for Asia's third largest economy. In recent times India has felt the effects of several negative aspects, notably a weak currency, rising inflation and a dip in the amount of foreign investment in the country.

However, figures indicate that there are signs that India's growth rate has been rising in the most recent quarter. During the period from July to September, the economy expanded at an annual rate of 4.8% - an increase of 0.4% from the April to June figure. These are positive messages, and India's economists are hoping this trend is set to continue because this marks the fourth consecutive quarter that the rate has been below 5%. Indeed, that 4.4% statistic from the previous quarter was India's lowest for four years.

The economic advisory council to the prime minister actually lowered the growth outlook for this financial year, such were the levels of pessimism about likely performance. Their earlier projection of 6.4% has now been reset to 5.3%.

The reasons for India's fluctuating economic fortunes are fairly complicated, but there have been several mitigating factors that have had a particular impact. Key sectors in India's economy such as manufacturing output and the mining industry, have experienced a slowdown in operations. This slowing down in growth has coincided with a period of sustained economic recovery in more developed markets, especially the USA. This has had the effect of making foreign investors less likely to see India as their first choice for business.

There has also been speculation that the USA may scale back its economic stimulus measure. The knock-on effect of this is that investors have been pulling money out of India. As a result, the rupee has dipped nearly 25% against the US dollar in the first nine months of this year. India's currency has recovered somewhat but is still down by 13% against the US dollar since January.

Indian finance minister P Chidambaram stated that a combination of high food and rising fuel prices had contributed to the current inflation levels becoming entrenched.