India Situational Analysis 2011 Empowered People: Resilient Nation
The financial and economic crisis of 2008 has cast its shadow on the world economy and sharpened the dichotomy between the growth path of the advanced economies on the one hand and the emerging economies on the other.
While the advanced economies experienced recovery, growth remains subdued, unemployment is still high, and renewed stress in the euro zone is contributing to downside risks. In the emerging economies, economic activity is buoyant, though inflationary pressures are emerging contributed in part by strong capital inflows. However, pressures on account of the high fiscal imbalances in the advanced countries and large exposure of banks to sovereign debt pose a risk to the financial stability of the global economy.
The Indian economy exhibited remarkable resilience in recovering from the global financial and economic crisis of 2008 and resuming its high growth path in 2009-10. Nonetheless, the situation is still fragile and the risk of the economy suffering a setback due to adverse feedback loops from the global financial conditions, particularly developments in the euro zone need to be factored in1. Inflation, particularly food price inflation, has emerged as a major challenge in the past couple of years seriously jeopardizing food security of the poor.
Despite monetary tightening and repeated raise in benchmark interest rates by the central bank of the country, the Reserve Bank of India, taming of inflation has been a challenge. The high interest rate regime that has been ushered in as a consequence of repeated hikes in benchmark interest rates has led to the concern that it may impact adversely on the growth rate of the economy. In fact, the Reserve Bank of India has revised downwards its forecast for 2011-12 from 8% to 7.6%2.
India is among the top ten countries registering a high rate of growth in the Human Development Index values over the past twenty years. The Government has been in the forefront in initiating several right based legislations thereby giving concrete shape to the provision of basic freedoms enshrined in the Directive Principles of the Indian Constitution3. The various initiatives constitute a set of mutually reinforcing measures that are designed to empower and enhance the entitlements of the poor. Civil society supported by an active media, has been vocal in demanding more accountability and transparency.