Indias Current A/C Deficit From The Saving Investment Perspective

Widening of CA deficit shows the saving-investment imbalances of both the sectors i.e. household sector and public sector Household sector decrease by 3%of GDP in 2011-12 Financial saving decline by 2.4% of GDP Due to persistently- high inflation real return on households financial saving depressed reaching 8% of GDP in 2011-12. Due to which financial saving investment deteriorate by 3% of GDP in 2011-12. Depreciating real effective exchange rate Rising import in high inflation

 Public saving decline as well as public investment also decline due to which rise in infrastructure bottlenecks and further weakening of the investment climate. There was over 12% inflation expectation in next 12 months due to which real yield saving deposit turn negative on saving certificate continue to imply low real expected returns.
Due to this household saving have shifted to non-financial assest.

Spillover Analysis
The slowdown have a spillover effect on the other SOUTH ASIAN economies and the rest of the world. 1% decline in GDP of India generates significant output losses in Nepal and followed by 0.21% after a year.

Tightening of liquidity condition will make financing of the large current a/c deficit in India more difficult due to potential capital outflows. The oil supply shocks decline output and create moderate inflationary pressure India due to low pass through of higher international oil prices to domestic markets which in turn cause tightening of policy to stabilize the inflation.

 Equity prices and rate effectiveness exchange rate also decline, Due to oil demand shocks India experiences long run inflationary pressure.

Defining and Explaining Inclusive Growth and Poverty Reduction

Inequalities between the rural and urban population. Inequalities between the income between rural and urban.

The real consumption about 8% decline in urban poverty, whereas 5% in rural poverty.

 The average expenditure growth is very close for the rural population, reflecting both a more uniform initial distribution, but indicate further widening of a more unequal initial urban distribution. The growing intra-urban inequality was responsible for lower inclusive growth in urban areas. Inclusive growth integrates the pace and distribution of economic growth, thus providing a unifying depiction of the evolution of inclusiveness Critical for ensuring continued financial deepening, increasing access to finance, and broadening growth

THE ROLE OF CONFIDENCE AND UNCERTAINTY

Several supply side constraints and confidence factors has been cited as plausible causes of India's weakening growth and investment due to
Raising policy uncertainty Delay project approval Supply bottleneck High and volatile inflation Heightened global uncertainty

 India's policy uncertainty has remain high which is primary driven by India's domestic policy challenges and not by global uncertainty such as
Change in expectation about QE tapering

PRODUCT AND LABOUR MARKET

Product and labour market rigidities have constraints the expansion of manufacturing sector ( despite many policy initiative taken by World Bank )
Tight regulation have hurt productivity and labour welfare