Reasons for fall in India’s GDP growth to 4.5% in Q4-2012-A Decade’s Low growth

      1)    Government inaction on reforms and creation of impediments for investment/investor sentiments since the UPA-II came into power is the main reason for drastic slowdown in economic activity:

• Insurance sector reform viz., raising of FDI from 26% to 49/74%.
• Pension sector reform including creation of pension regulator.
• Lack of incentives for investment.
• No measures being taken in spite of persistently high inflation due to supply side constraints.
• Continued expansion of government expenditure by ever increasing market borrowings leading to unmatched demand surplus in turn causing high inflation.
• Long pending Land acquisition reforms.
• Infrastructure reforms – like coal linkages for power plants, long delay in administrative clearances for various infra projects, gas price issue for natural gas from KGD-blocks to name a few.
• Judiciary reforms – long pending justice from the judiciary is acting as impediment to country’s image.
• Introduction of GAAR beating down the sentiment of investors which was already low.
• Applicability of MAT to SEZs which were engines of growth for exports.  Exports were already hugely lagging imports and introduction of MAT to SEZs has considerably affected the growth of SEZs.
• Inefficient public distribution system and loss of huge amounts of grains at the govt. storage houses.

2)   High inflation leading to high interest rates- Continued expansion of government expenditure by ever increasing market borrowings led to unmatched demand surplus in turn causing high inflation. High inflation has bound the hands of RBI to cut policy rates leading to high interest rates. High interest rates have badly affected the much needed turn around in investment cycle.

    3) Government inaction leading to unprecedented fall of rupee worsening BOP position of the country dragging GDP growth.