Thursday, September 5, 2013

Whats Causing The Decline In India's Economy?

India's growth rate has declined this year.  This article describes some of the structural problems in India that might explain the decline.  Most of the structural problems that it describes existed while India was growing rapidly.  Therefore, its hard to understand why they are responsible for slowing economic growth. 

India's growth was stimulated, in part, by growth in the technology services sector.  Companies like IBM, Accenture, etc. took advantage of India's pool of highly skilled workers to provide information technology services to their customers outside of India at lower cost.  Growth in that sector may have been responsible for much of India's economic growth, and it may have peaked.  That labor pool may have been exhausted and the market for information services provided by IBM and the like may have stalled as a result of slow growth in their domestic markets.

The other factor, that is described in this article, is the flight of capital from India.  Investors were seeking high returns in India while it was booming and they are looking elsewhere for better returns.

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