Tuesday, December 13, 2011

India's Economy Continues Its Decline

More depressing economic news from India.
EXPECTATIONS for India’s economic growth rate have been sliding inexorably. In the early spring there was still heady talk about 9-10% being the new natural rate of expansion, a trajectory which if maintained would make the country an economic superpower in a couple of decades. Now things look very different. The latest GDP growth figure slipped to 6.9% and industrial production numbers just released, on December 12th, showed a decline of 5.1% compared with the previous period, a miserable state of affairs. The slump looks broadly based, from mining to capital goods, and in severity compares with that experienced at the height of the financial crisis, in February 2009, when a drop of 7.2% took place. Bombast is turning to panic.
I found this bit on inflation, interesting though:
Moreover the Reserve Bank of India (RBI) has been raising rates through the year to try to bring inflation, running at some 9%, under control. At Mumbai drinks parties, after a scotch too many, industrialists can be reduced to apoplexy on this subject—the central bank, they argue, has overreacted, killing growth to tame an inflation problem that is largely the result of structural factors such as poor food supply chains.
Inflation as a product of poor food supply chains. The implication is that the problem is not food shortages, but simply getting the food from producers to consumers. However, this isn't merely an infrastructure problem, but also another indication of the quickening demographic shift from rural to cities.

The same could occur here if there where major disruptions in transportation. Imagine what would happen if the TSA was in charge of conducting regular inspections of commercial vehicles. Those same slow, inefficient lines that are choking off the airline industry would strangle commercial transport as well, reducing supplies of consumable goods (such as food) and therefore driving up prices.

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