Challenges Faced by India Inc.

1732 Words Jul 22nd, 2009 7 Pages
10 challenges for India to reach 2050 potential
“In our latest annual update to our Growth Environment Scores (GES), India scores below the other three BRIC nations, and is currently ranked 110 out of a set of 181 countries assigned GES scores. If India were able to undertake the necessary reforms, it could raise its growth potential by as much as 2.8% per annum, placing it in a very strong position to deliver the impressive growth we outlined,” it says.

Here are the 10 things for India, as outlined by Goldman Sachs, to achieve its 2050 potential:

India’s governance problems overarch all its other problems. Without better governance, delivery systems and effective implementation, however, India will find it difficult to educate its
…show more content…
IT has given major benefits to a broad variety of countries, ranging from ‘developed’ countries (such as New Zealand, Sweden and the UK) to ‘developing’ ones (such as Brazil, Korea and South Africa). For India, there are probably broader powerful benefits,” it says.
India’s gross fiscal deficit remains one of the highest in the world and, recently, government liabilities have been increasing at an alarming rate.

Goldman Sachs estimates that the overall government deficit stood at just under 6% in FY2008. In FY2009, this may accelerate to above 7%, due to a large debt-waiver for farmers, a big wage hike for civil servants, increasing fertiliser and oil subsidies, and higher exemptions on income tax.

At such high levels, government borrowing crowds out private-sector credit, keeps interest rates high, adds to already high government debt, and becomes a key source of macro vulnerability.

Therefore, a medium-term strategy for fiscal policy, which reduces the overall deficit to a sustainable level, is critical for India.
India’s financial sector remains small and underdeveloped. The state still dominates the sector, holding 70% of banking assets, a majority of insurance funds and the entire pension sector.

Additionally, markets are lacking in corporate debt, currency and derivatives. This leads to a lack of credit and low financial savings. Total credit, at 50% of GDP (although increasing rapidly in recent years), remains well below that of its Asian

More about Challenges Faced by India Inc.

Open Document