Impact of Greece crisis on the Economy of Perceptions

 | August 06,2012 11:51 am IST

What else can we call an economy running on perceptions of the people and experts of that country?

Economy of perceptions is the term which can be coined for the Indian Economy. Indian economy started suffering FII rollbacks and domestic investor disbelief since the S&P rating downgrade in India.

The inference of this downgrade was that the Indian Markets are not conducive for investments. In a very lay man term it said that the Indian Governments Debt paying capacity was questionable, the Indian bonds were risky assets to invest in. India being a country ranked as third best economy to park your money or rather one of the best economy where in the time of doldrums all could rely upon with your investments was bought into question.

The S&P downgrade was followed in a few days by our Prime Minister Dr. Manmohan Singh announcing a bailout package of $ 10 billion for the Greece crisis.

The reactions were witnessed largely in stock markets and the currency fluctuations as well. The irony being that the anticipation of Greece crisis having huge Impact on India, being a major contributor to these turn of events.

When some data provided by Department Of Commerce & Import and Export Bank of India were analysed it was seen that
1.There was a downfall in the Indian Exports in the year 2011-2012 and that took a large dip but the reason behind this downfall was never the Greece Crisis or the downgrade it was the global economic scenario which in the coming days does not seems to ease up. For a matter of fact Greece contributes only 0.2526% of total Indian Exports which did notice a minute jump from the previous year.
2.Greece ranks 83rd amongst top 100 countries with which India has trade relations. Total trade being 2058.00 crores where as Indias total trade amounts to 2,826,102.04 crores

                                 Impact of Greece crisis on the Economy of Perceptions: DATA AS PER DEPARTMENT OF COMMERCE
                                      DATA AS PER DEPARTMENT OF COMMERCE

So for a country of Indias calibre which has continuously witnessed a decline in the External Debt to GDP Ratio over a period of last decade and a half being downgraded and a countrys people which will be, by far very mildly hit by a countrys crisis to fear in a big way is so very perceprtional.
Looking at the Indian Economy today we can see that we are surrounded by too many pressures of
1.High Inflationary Problems
2.Large amount of Scams
3.Black Money
4.Political Instability of our country

It is mere perceptions of the people of India that a slowdown is on the cards due to the expected downfall of Greece and some signals of the negative macroeconomic conditions in our country like expected slowdowns in many countries, distrust of people in their own economy and several other issues which is affecting Indias Trade Balances.

Despite so many issues concerning our economy there are so many companies in India which still finds India as a land of opportunities as for example CocoCola plans has planned an investment of $5 billion (Rs.28000 crores).

India Inclusive Growth story is not hidden from anyone. It may be on a decline due to many factors but India Inclusive Wealth. INCLUSIVE WEALTH REPORT2012 recently published by the United Nations under the supervision of Sir Partha Dasgupta of Cambridge University has found India amongst top 5 countries in creating Inclusive wealth.

In the time where Samsung SIII sales (Rs 38000 mobile) is leading in handsets being sold in India we are asking a question whether India has what it is required to sustain.

Indias biggest problem today is the perception of its countrys people towards its economy. Despite steady growth in GDP at a pace of 5%. India which is regarded as one amongst the top havens of investment is witnessing FII rollbacks and declining currency. The most perfect example of a PERCEPTIONAL ECONOMY.