India’s Slower GDP Growth Is a Threat to Curb Its High Poverty

High-Inflation and Slower Economic Growth Effect Poverty

First Published Date: June 28, 2011 ADawnJournal.com

India is a country which stands seventh largest in area and second largest in population. As a developing country, India’s economy is the tenth largest in the world and third largest in Asia in terms of nominal GDP and forth largest in terms of purchasing power parity (PPP). India is a growing giant and its economy is growing fast. This growth rate seemed to be on the verge of 10 percent, as economists were convinced. However, recent data released show India’s economy grew by 7.8 percent in the fourth quarter of 2010-2011 ending in March. This slower GDP growth rate will likely to effect the reversal of India’s high poverty level.

7.8 percent growth is the lowest rate in five quarters. The same three-month period of the previous fiscal year had a growth rate of 9.4 percent. The GDP for the full 2010-2011 fiscal year stands at 8.5 percent, which is lower than estimated 8.6 percent, but an increase from 2009-2010 rate of 8 percent.

High inflation, which is currently running at 8.7 percent, is one of the major causes to weaken economic growth. Indian prime minister recently stated that 2011-2012 growth rate prediction of 9 percent would likely to be missed. To curb high inflation, India’s central bank raised interest rates nine times in the past fifteen months. However, these rate hikes slowed down manufacturing sector investments, which likely impacted industrial output.

India needs high (such as double-digit) growth to tackle its high poverty. However, to fight inflation, this growth has to be sacrificed. India is under economic expansion for 20 years; however, the poverty level hasn’t improved significantly. One in every two children in India is still malnourished. India needs high economic growth to run various essential projects aiming to curb poverty for millions of poverty-stricken population. With high inflation and slower economic growth, things are not looking bright at this moment.