This is a slightly difficult article but I expect a similar article in the P.O. exams, especially in SBI PO. Read it twice and time your second attempt.
Anything around 4 min is good for this article.
I have taken this article from WSJ India Real Time and you can access the original article from the link given here or at the end of the article. The link is this
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Data show there is a very real threat
that India’s economic growth could slip below 5% this fiscal year.
Industrial production shrank in
December for the second month in a row; grain production
estimates point to a decline in output because of drought, and food
inflation is already high; the trade deficit expanded in January,
raising fears that India’s current account deficit could hit record
highs.
Last year through March, India’s
current account deficit as a percentage of gross domestic product
reached 4.2%. The situation has worsened this year, with the ratio at
4.7% in the first half and as high as 5.4% for the second quarter
through September.
The central bank said India’s trade
deficit to GDP ratio rose to 11.7% in the nine months through
December from 10.1% a year earlier. The trend continued in
January, when exports grew a modest 0.8% in dollar terms and
imports accelerated. In January India’s trade deficit touched 20
billion dollars, the second highest of the year.
With weakening economic growth, India’s
non-oil imports have fallen. But the depreciating rupee and rising
oil prices have resulted in a surge in oil imports, leading to
a spurt in the trade deficit. India’s current account
deficit to GDP ratio for the year may well be in the vicinity
of 5% or even above as India’s economic growth slows.
Such a high current account deficit
poses a big challenge for the economy and could lead to a downgrade
in India’s sovereign rating. Many have blamed high gold imports for
the worsening current account deficit, but data show gold imports for
the first nine months were lower than the previous year.
The trade deficit and slower growth in
services exports were the real culprits. Weak external demand
combined with high imports of oil and oil products have resulted in a
deterioration of the trade balance.
The likely fall in the savings rate is
another concern. The current account deficit goes up if an economy
invests more than it saves domestically,
and that is what is happening in India.
The savings rate last year fell to
30.8% of GDP from 34% the previous year and a peak of 36.8% in
2007-08. This year, the savings rate might well drop below 30%.
The current account deficit needs to be
financed by foreign capital flows. But foreign direct investment has
slowed to a trickle as investors appeared unnerved by a
sense of policy paralysis in India and concerns over governance.
However, foreign investment inflows, which are more volatile
in nature, have risen and helped finance the deficit. But an
excessive dependence on FII inflows would lead to increased
volatility of the rupee, which is already showing signs of weakness.
India needs to aggressively pursue
policies that will help manage the deficit. These include diligently
sticking to the fiscal consolidation roadmap, which includes
cutting down subsidies; improving the business environment so that
foreign investors feel more comfortable; and taking measures to
arrest and then reverse the decline in savings.
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Ouch, India’s Economic Woes, By
Kunal Kumar Kundu , The Wall Street Journal - India Real Time,
February 22, 2013, 9:30 AM
http://goo.gl/Zqe4a
