India: Linked or De-linked from the Global Economy? « iMFdirect - The IMF Blog - 0 views
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shared by Thomas Iida on 24 Feb 12
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Although India’s economy has generally been less prone to external forces than many others, we still need to contend with the larger than typical risks in the global economy. These risks harken the need for a new wave of reforms.
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In our latest Regional Economic Outlook for Asia, we expect India to grow by about 7½ percent in 2011 and 2012, only marginally below its estimated potential. Even within Asia, India does relatively well in this world.
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India is less open to international trade than most other economies in the region. In particular, its rural consumption is fairly insulated from the world economy. More importantly, India’s exports are less dependent on advanced economies,
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India’s exports are more diversified—both geographically and in terms of the products it sells—than its neighbors and competitors.
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India has become more financially integrated with the global markets than commonly thought. We saw this in 2008, when India’s financial markets came under considerable pressure and investment became the main transmission channel, dipping substantially. To give another example, India’s stock market is one of the most correlated in the region with the VIX, a measure of market expectations of near-term stock market volatility and hence a good indicator of global risk aversion.
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shift the composition of budgetary expenditures away from untargeted subsidies (such as those on fuel and fertilizer) and toward infrastructure, health, and education will help in both dimensions