India’s failed reforms leave food to rot

Consumer demand

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India GDP.pngMany analysts have argued that demand in India could easily replace volumes lost due to a slowing Western economy. Sadly, this week has provided further evidence of why this is merely wishful thinking.

As the chart shows, India’s GDP is the same size as Canada’s. But India’s 1.4bn people means its GDP/capita is only $1371, compared to Canada’s $46303. This matters, as it means India’s needs are much more basic than those of the wealthy Western nations.

Equally, India’s development is increasingly being held back by politics:

• Currently, 40% of India’s food rots on the way to the consumer
• Last week, India’s premier Singh announced major retail reforms
• Foreign retailers would have been able to own 51% of Indian companies
• This could have opened the door to major improvements in food supply
• It could also have increased polymer demand for storage etc

But this week, Singh was forced by his own party and the opposition BJP to withdraw the proposals.

It used to be said that progress in India came ‘with two steps forward, one step back’. This week suggests the model has instead become ‘one step forward, two steps back’. Not only will India’s food continue to rot. But this failure will reduce the chances for reforms in other areas.

Equally, this will reduce still further India’s ability to compensate for slowing Western demand.

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