Sunday, June 10, 2007

India needs a period of slower growth





India's economy | Waiting for the monsoon | Economist.com

This is not to deny that India's economic speed limit has increased, to perhaps 7-8%, thanks to stronger investment and economic reforms. But growth has exceeded that limit. The economy still shows alarming symptoms of overheating, such as soaring house prices, credit growth of 28% over the past 12 months and 15%-plus average rises in wages for skilled workers. Industrial capacity utilisation has risen to a record high, and rampant domestic demand sucked in 41% more imports than a year ago in April, pushing the trade deficit to a record level.