Is India losing its Mojo?

By Vikram Barhat | December 22, 2011 | Last updated on December 22, 2011
1 min read

India started 2011 with a bang, but by the looks of it, the emerging economic powerhouse may be headed to wind down the year with a whimper.

Goldman Sachs’ Jim O’Neill says that of the BRIC nations, India has been the biggest disappointment. A recent article by CNN’s Fareed Zakaria relates a troubling story about India whose growth has dipped below 7% for the first time in two years; the Indian rupee has been freefalling against the U.S. dollar and has become Asia’s worst performing currency this year.

Further, the world’s largest democracy received less than $20 billion in foreign direct investment in the first six months of 2011; it’s deficits soaring and funding drying up.

The report says India’s woes are not economic. The issue is governance, or lack thereof, especially its paralyzing politics. Indian politicians may be selling “Incredible India” story to the West, but at home they meekly surrender to the populist protectionist sentiment which is detrimental to the economy.

Emerging markets experts have often looked to India as a second shot at high returns for investors who missed the boat on China. But with many frontier markets snapping at its heels, India may not get a second chance to retain such a distinction.

If New Delhi doesn’t put its house in order fast, it won’t be long before the “I” in BRICs would represent Israel or Indonesia, not India.

Vikram Barhat