Yet, the government has failed to pursue economic reforms and has flip-flopped on key policies such as letting foreign supermarket chains enter the country. That has hurt sentiment among foreign investors, who for many years were willing to fund India’s large trade deficit.
As a result, India’s benchmark Sensex Index has fallen nearly 18 percent from its peak in November 2010, and over the past year the rupee has slumped 25 percent against the dollar. Growth slowed to 5.3 percent in the January to March quarter, the slowest pace in nine years and a far cry from the 9 percent growth rates in recent years.
Creaking Infrastructure
India’s government says the country needs $1 trillion in infrastructure investments by 2017 to fix the dismal state of its roads, ports and power supplies. The government was hoping the private sector would provide most of this funding, but the head of India’s Planning Commission admitted just this month that the country won’t be able to meet the $1 trillion target.
India’s power sector problems have also been well documented. Several major private firms which began building large power plants in recent years have been forced to abandon or delay them because of government-set electricity rates that no longer make sense in the face of higher fuel costs.
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