Is India the next Greece?

Since the dawn of the financial crisis in Europe, there is one name that has been talked about over and over again. It is that of Greece. The Mediterranean country has become an example of how spending beyond your means can lead to just one thing. Financial disaster. A disaster that has sunk the entire Euro zone into recession. Unfortunately unless India mends its ways, it is headed in the same direction. The country has a ballooning fiscal deficit. In the absence of policy reforms, this is all set to keep increasing. And eventually lead to India's downfall.

This is the opinion of the head of HDFC Bank, Mr Aditya Puri. He opines that India's government inaction is going to lead it on the path of a financial disaster. In his opinion all that the government is doing is playing the blame game. Each political party is blaming the other for inaction and corruption. Unfortunately this has taken away their focus on the core issue of running the country. Mr Puri feels that if each and every government official just did his job, then India is well poised to be a shining star in Asia.

And there seems to be quite a bit of logic in this statement. If we look at the other countries in the region things are not so bright. China is going through a slowdown. Korea is not doing too well either. As a result, India has a great opportunity to emerge as a star. But the government inaction and lethargy is pulling it back. In Mr Puri's opinion there are some crucial areas that the government needs to work on. These are addressing the fiscal deficit, solving the coal issue, transparent and clear policies on land acquisition, mining and environment. And improving accountability and governance in government and public sector undertakings. Once action is taken in these areas, things are expected to improve in all likelihood.

Though it is important to note that India's high domestic savings and consumption rate makes the economy far less vulnerable than Greece. Hence, investors should not be alarmed by Mr Puri's observations. However, there is no doubt that the government must act fast to respond to the economic crises. This means that they need to stop humiliating the nation by stalling parliament sessions and taking a jab at each other in the media. Instead doing their work like Mr Puri suggests would be a better idea. But are they willing to do this? We hope they do