Even US do not believe India's growth story, says it may be overstated
The US state department report says the government failed to carry out reforms comprehensively to attract investors
United States, one of India's most trusted economic and strategic partner, do believe that the India's growth story is overstated. India with 7.5% of growth is considered to be one of the fastest growing economies in the world.
United states State Department in a report said Narendra Modi government has been slow in carrying forward economic reforms.
Though sceptical of government's claims on growth the report titled "investment Climate Statements for 2016" appreciates government's steps on various spheres including decision to ease foreign investment. The report however says that the government failed to carry out various legislation which resulted in investors retreating from their willingness to invest. The report says that the government failed to muster support from other political parties in bring key legislations which would have eased business climate.
There are few quick fixes to the structural impediments, poor regulatory environment, tax and policy uncertainty, infrastructure bottlenecks, localization requirements, restrictions in many services sectors, and massive shortages of electricity that hamper India's growth potential, the report says.
The State Department said the 2014 election marked a turning point in investor sentiment, since the minority of the governments were unable to carry out economic reforms due to political compulsions. The report praises Raghuram Rajan, the RBI governor "Additionally, the monetary stewardship of Raghuram Rajan, the respected Governor General of the Reserve Bank of India, further boosted investor sentiment," the report said.
Different economists and countries like China have already stated that India's growth story is overstated. Critics notes that the high growth rate is presented at a time when major industries are actually struggling. According to to some experts when India's growth has hit 7.5% corporate revenues and profits have soared above 14% on average. But this has happened now.
Morgan Stanley's Chief Global Strategist Ruchir Sharma has also said that the growth presented by the government may be overstated.