Sunday, March 31, 2013

Cyprus has cracked; will India implode?

It is odd to compare India and Cyprus. Cyprus is a small Mediterranean country with a currency common with 16 other nations. Its banks unwisely (in hindsight) over-invested in Greek sovereign bonds and suffered huge haircuts. Laiki Bank is being wound up. Bank of Cyprus is getting restructured. Cyprus would have become bankrupt but for bail-out by the troika of  European Central Bank, IMF and European Union.

India's Current Account Deficit in the latest quarter was ominously high at 6.7% of GDP. CAD and Fiscal Deficit are our Achilles' heels as of now. Our CAD at present is higher than what it was in 1991 when India was on the brink, about to default.

In World Bank's 2013 "Doing Business" Rankings, Cyprus is 36th out of 185 economies. India is 132nd ! (Pakistan is better placed at 107.) In 'ease of enforcing contracts', India is 184 i.e. last but one!

In World Economic Forum's competitiveness table for 2012-13, Cyprus is ranked 58th out of 144 nations. India is 59th, so ominously close to Cyprus!

Of course, India is totally dissimilar to Cyprus in terms of per-capita income and corruption levels. According to WEF, India's per capita PPP GDP is US $ 3,400 as against Cyprus' US $ 29,000. 15.8% of respondents feel India is characteristically corrupt whereas the figure for Cyprus is 3.4%

India's penury is so deep and widespread that any incremental economic misery makes no difference. It is this dubious advantage that keeps India afloat.


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Anonymous said...

well written sir.

K.R.Srivarahan said...

Hi, Mr.Ravishankar,
What is your mobile number / email ID?