India - A boom-bust economy?

A positive trait of the Indian economy has been its remarkable macroeconomic stability after 1991. That resilience is fast eroding. As the wobbles at the end of last year showed, the economy is increasingly driven by the boom-bust dynamics of flighty capital flows that feed its growing deficits. Recent balance of payments statistics show an accelerating deterioration: current account deficit at 4.3 per cent of GDP in October-December 2011 – following 4.1 per cent and 3.5 per cent previously – met by a $12.8-billion erosion in reserves as the hot money servicing these deficits abruptly reversed. 

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