Читать книгу The Political Economy of the BRICS Countries - Группа авторов - Страница 37

India witnessed a decade-long cycle of boom and bust, starting in 2003. During the boom, the Indian economy grew close to 9% annually, led by IT services and exports. This was accompanied by a rapid rise investment to GDP ratio (to 38–89% of GDP) largely in the PCS financed by rising domestic saving rate (35–36% of GDP), and supplemented by a flood of foreign private capital peaking at 10% of GDP in 2007–2008. This was accomplished under benign macroeconomic conditions, especially with stable fiscal balance as the state withdrew from infrastructure investment in favor of PCS to reduce fiscal deficit.

After the GFC in 2008, economic growth recovered quickly on the strength of capital inflows caused by QE in the advanced economies and fiscal stimulus and monetary easing undertaken to stimulate domestic demand to compensate for the loss of external markets. However, the high growth rate could not be sustained beyond 2011–2012, when the macroeconomic conditions changed quickly. GDP growth rate plummeted below 5% in 2013–2014, but recovered somewhat thereafter, though it is hard to be sure of the strength of the recovery.

After the boom went bust, India is now saddled with excess capacity in manufacturing due to lack of investment demand and plummeting external demand for both services and manufacturing. A large number of infrastructure projects under private–public partnership (PPP) remained incomplete, as the cost of financing shot up and legal and technical issues bogged down their completion. This non-financial PCS is saddled with an unprecedented amount of unserviceable debt, which has turned into banking sector’s non-performing assets (NPAs), pulling down its profits and thus adversely affecting fresh lending. This is associated with a sharp fall in domestic saving and investment rates. The problem of bad debt is unprecedented, but seems quite in line with many EMEs currently, but it is smaller than that of China’s.

With poor economic recovery from the great recession (Nagaraj, 2013), India’s external market for services and its capital- and skill-intensive manufacturing have dwindled — with explicit protectionist law such as ‘Buy America’ enacted by the Obama administration and the Trump administration’s explicitly protectionist policies, along with the threat of automation. India as well as China have the advantage of a large domestic market. Yet the PCS is not in a position to step up investment given the high debt ratios and declining profitability. Therefore, the way out of the present impasse is to step up public infrastructure investment to ease demand constraint for capital and intermediate goods industries and supply cheap credit to agriculture and small-scale sector so as to augment food production and to labor-intensive manufactures.⁵

In political economic terms, unlike China, India is a liberal democracy, with reasonable political stability, with well-defined separation of powers between political executives, legislators and judiciary, well-developed market-based institutions such as capital markets, a strong domestic PCS, and market regulators (Huang and Khanna, 2003).