Poor governance and inadequate infrastructure coinciding with depleting foreign investment are holding up growth in India, claims the World Bank's chief economist Kaushik Basu. As annual growth rate floats below 5%, Asia's third-largest economy has been weighed down by high inflation, a weak currency and a drop in foreign investment with a slowdown in mining and manufacturing not helping matters. But 2014 is a new year so what prospects does India have to look forward to? More importantly what challenges are they going to be facing?
One fundamental thing India have done though is during their times of growth they have built up the economic structure and eradicated many of the weaknesses leaving a good foundation for them to rebuild their recovery now. The economy has been doing pretty well from 1994, very well from 2003, and especially so from 2005. But in the last one and a half years, it has done relatively poorly and there are two big challenges for India. One is the poor governance. Decision making is slow, the bureaucracy is extremely cumbersome. But it's difficult to change it as it has been the legacy of the last 60 years. The other is infrastructure. India needs better infrastructure. This is relatively easier to do and I am hopeful India is going to improve its infrastructure in five to 10 years. But if the governance and infrastructure can be simultaneously or within a short time, both improved the prospects will be colossal and will fire the Indian economy back towards top form.
Fears for the severity of the Indian downfall have been exaggerated to an extent, however they have been fuelled by worrying statistics but not worrying enough to ignite a tiny fire into the blaze that has been expressed by many economists.
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