An Indian Rhapsody

Europe is scrambling to keep the Euro together and the United States is readying itself for a tight electoral race, come November 6, 2012. Both continents have flushed their economies with cheap money to circumvent unemployment that remains stubbornly high and invigorate growth that remains minimal. The low yields offered by sovereign credit of the developed markets have urged investors to look to alternatives. Discounting for high-yield assets offered by a few European countries (with equally high default risks), the BRICs equation throws some interesting alternatives.

India recently had its sovereign credit outlook recently downgraded to negative from stable by Standard and Poor’s.  The reasons – an inhospitable investment environment made cumbersome by sketchy oscillating policy makers, gridlock in domestic politics, a burgeoning budget deficit, a weak Rupee and, incumbently entrenched corruption. Neither, highly publicized cases involving disgruntled foreign investors nor internal feuds in the ruling governance; the United Progressive Alliance has added positively to India’s investor haven image. It’s GDP, once galloping fervently, has weakened to a mere 5%.

Yet, the world’s largest democracy is still looking lucrative. Assuming Prime Minister Manmohan Singh’s recent blitzkrieg of reforms as outliers, let’s appraise India on its inherent indicators by assessing latest available statistics (courtesy: World Bank).

The primary school starting age in India is 6 years old in contrast to China’s 7 years old and the completion rate stands at 95% for both boys and girls. The secondary school starting age in India is 11 years old in comparison to China’s 12 years old. Public spending on education has historically been high at 3% of GDP in comparison to China’s 1.9% and 2% in Turkey. Despite its huge population, equity in distribution of income is a prominent theme in India with income held by the lowest 20% strata of the population at 8.64% in comparison to 5% in China, 2.85% in Brazil, 6.45% Russia and 5.7% in Turkey. With the largest contingent of a population residing outside their native country, Non-Resident Indians repatriate US$ 54 trillion i.e. 3% of GDP in stark contrast to non-residents of Brazil at US$ 3 trillion i.e. 0.18% of their GDP, Russia at US$ 5 trillion i.e. 0.35% of GDP, China at US $52 trillion i.e. 0.89% of GDP and Turkey at 0.11% of GDP. Thus, its historic lows of INR 56 per one US$ has in fact encouraged a sharp increase in the rate of repatriation, thereby unclogging any funding gaps faced by India in the form of lower Foreign Direct Investment (FDI). Indeed, a weaker Rupee exacerbates the current account deficit by effectively making imports expensive and thereby stoking inflation that currently is stubborn at a rate of 7.7%. However, India’s deficit isn’t as heavily dependent on foreign capital leaving less room for foreign exchange risk as seen during the South East Asian crisis of the 1990s where a flight of capital had dire repercussions with the manic widening of the current account trade gap.

However, a self-sufficient behemoth, India has one of the highest savings rate with gross savings at 33% of GDP in comparison to 17% of GDP in Brazil and 24% of GDP in Russia. The market capitalization of its listed companies comprise 54% of GDP in variance to 49% of GDP in Brazil, 46% in China, 42% of GDP in Russia, and a mere 26% of GDP in Turkey as traditionally, India has always been lead by Adam Smith’s Invisible Hand with ‘India Inc.’ always steering the juggernaut forth.

Friedrich Wilhelm Christian Karl Ferdinand Freiherr von Humboldt, a Prussian philosopher and founder of the University of Berlin said of the Bhagavad Gita “the most beautiful, perhaps the only true philosophical song existing in any known tongue”. In ‘The Argumentative Indian’ Amartya Sen succinctly highlights the message embedded in the sacred text, that of “faring well” and not just “forward”.

India is indeed embodying the message well.


Nair R., 2012. Moody’s says India sovereign ratings ‘stable’. Live mint & The Wall Street Journal, [online] 26 September. Available at: <> [Accessed 29 September 2012]

Jabri P., 2012. India government preparing new reforms. Business Recorder, [online] 27 September. Available at: <> [Accessed 1 October 2012]

Leaders, 2012. At Last. Economist, [online] 22 September. Available at: <>

© 2012 Tanya Rawat. By posting content to and from this blog, you agree to transfer copyright to blog owner.

© Christine Muraton Photography

One thought on “An Indian Rhapsody

  1. I believe you meant $54 billion and not $54 trillion to be the repatriation amount sent annually by expat Indians A typo? The total GDP of India is about $1.6 trillion

    Also, in the analysis, mention of a lack of sufficient export competitiveness particularly in products having large import content, would enrich the argument.


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