Is Indian Economy Going to Face an External Crisis – Stocktaking in 2011?

Abstract

Over the last few months of 2011 Indian economy has been showing signs of weakness. The Report of Government of India on external debt however claims that India’s external debt position is steadily improving on account of prudent management. But with a thorough study of the macroeconomic indicators in terms of a performance index and on a comparison between India’s index and a similar index of Argentina, this paper shows that although a crisis is not imminent, the situation has definitely taken a downturn. The index shows appreciable deterioration of the performance of Indian external sector, although still there is some gap between performance levels of the crisis years 1989-91 and that of November, 2011. So unless some bold measures are undertaken, the situation may drift into a crisis. The paper gives the relevant policy prescriptions in this regard.