India and the Eurozone Crisis

Like most of Asia, India is affected by the crisis that has spread from the US to engulf the Eurozone. Exports have fallen and many foreign institutional investors have moved out. The country, under pressure from the IMF has taken some steps to reform and liberalise its business laws but is unable to effectively address its major problems such as inflation, poor governance, corruption and inadequate infrastructure and services in on economy still dominated by the informal sector. To control the fiscal deficit, the government has generally followed neoliberal prescriptions, which have led to an explosive increase in inequality. India is threatened by widening political and social conflict and a rise in poverty rates. Profound changes in the economic system are thus required.