7 reasons why the FM is finding it difficult to turn around the economy

India's Finance Minister Palaniappan Chidambaram waits for the arrival of Japan's Prime Minister Shinzo Abe before their meeting in Tokyo

7 reasons why P Chidambaram is finding it difficult to turn around the economy

1) Impending General Elections
Given the uncertainty over the outcome of the next general elections, private sector has suttered fresh investments. One year wait is not going to kill them, they say.

2) Clogged Pipeline of Investments
The cabinet committee on investments has managed to get many projects moving ahead, but on the ground work will take a while to start.

3) Interest Rate Uncertainty
The rupee depreciation has brought an abrupt halt to monetary easing. Though interest rates are only on of the many factors, they are one more reason to avoid investments in current environment.

4) Foreign Investors have Other Options
Growth prospects are certainly looking better in the US and Japan, and improving in many parts of Europe.

5) Consumer Sentiment has Worsened
The slow growth has given rise to concerns over job security and salary increases, while those entering the workforce are worried if they will get work. This has discouraged spending.

6) Threat of Ratings Downgrade
Government cannot run higher fiscal deficit to boost the economy because of the chance that the country’s rating could be cut to junk.

7) Politics has Stalled Reforms
Goods and services tax, higher FDI in insurance can provide impetus to the economy.

 

Source : The Economic Times

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