India’s growth can be checked by the rising oil prices and shortage of elite talent – IMF agrees
Nancy Shekaran
Oct. 6, 2007

The Indian Planning Commission's expectation of 9% during the 11th five-year Plan may not be realistic. International Monetary Fund agrees. The growth may be slightly lower in 2007 and much lower in 2008.

The biggest problem the Indian economy is facing is in the rising crude oil price and increasing shortage of educated elite talents. The capacity utilization of educated smart Indian talent is close to 100%. The Indian and foreign outsourcing companies have hired the Indian talents to service the outsourcing needs in IT and business process outsourcing.

The food prices are in sharp rise. The gasoline and diesel prices are ready to a big jump. The salaries are rising exponentially especially in cities like Mumbai, Bangalore, and Pune.

The rural sector growth is severely checked with increasing cost of fertilizers. The domestic growth is restricted by increasing prices.

As a matter of fact India can face massive hyperinflation if oil price crosses $100 a barrel. It is a possibility that cannot be overlooked.

Joshua Felman, senior resident IMF representative in India sees Indian growth prospects at the current level. The IMF is not willing to upgrade the growth outlook any time sooner.

Past experience shows IMF is always right in the trend prediction but they are not correct in judging the depth of change.

Indian economy is growing rapidly but the finance ministry has failed to curb inflation effectively. That has a serious implication in the long run. The economies in south and central America went through that periods rapid growth with incoming American and European FDI (Foreign Direct Investment). At the end, they failed to control hyperinflation. Today these are no longer favorites of American or European investment. The economies are no longer ‘economic locomotives’ of the world.

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