Here's a recent Washington Post story on slowdown in India:
....In developments that parallel events in the other Asian powerhouse, neighboring China, rising prices have forced the government to steadily tighten monetary policy. Interest rates rose for the 10th time in 16 months last week.
But business leaders are unhappy. They say the medicine could be making the economic situation worse.
Much of the inflation in India is a function of higher oil and food prices, factors that respond poorly, if at all, to higher interest rates. Instead of depending on the central bank, the government needs to push through the kind of agricultural reforms and investment it has been talking about for years, analysts say.
Government policy should be focused on improving agricultural productivity, but because that isnt happening, the burden is falling more and more on monetary policy, said Sanjay Mathur, Royal Bank of Scotlands Asia emerging markets economist in Singapore. Consequently, a number of sectors that shouldnt be getting hurt are getting hurt.
That means growth could fall back toward 7 percent, some economists warn, still faster than that of any major economy except China but below what India could achieve and needs, if it is to pull hundreds of millions of people out of poverty.
There is no point substituting one bad policy with another bad policy, said Surjit Bhalla, chairman of Oxus Investments. When the patient is down, dont give him another kick in the pants.
In the early 1990s, Indias government pushed through a series of economic reforms that unshackled the private sector and laid the foundation for two decades of strong growth. With that growth has come rising incomes, an expanding middle class and changing eating patterns. No longer dependent solely on rice, lentils and grains, Indians are demanding more vegetables, fruit, eggs, meat and fish.
Local agriculture has not kept pace. Farmers grow the wrong mix of crops, and about 40 percent of production is wasted before it reaches market because of inadequate distribution, warehousing and cold-storage systems.
Add to the mix a rural employment scheme that has boosted the incomes and appetites of Indias poorest, and a demographic bulge in hungry 15- to 24-year-olds, and it is little surprise that food prices are rising steadily year by year.
That in turn has pushed up wages, while production of raw materials such as coal, ores and cotton is also struggling to keep up with rising demand. Inflation hit 9.1 percent in May, and the central bank says it is expected to remain high through at least September.
To get food prices down, the government needs to promote horticulture and revolutionalize agricultural marketing and distribution, economists say. Allowing foreign companies such as Wal-Mart to set up supermarkets in India and invest in cold-storage facilities, a long-promised but still undelivered policy goal, would also help, they say.
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The Organization for Economic Cooperation and Development last week underlined the need for a new set of reforms in India to bolster growth, and no one in the finance or planning ministries seemed to disagree. The problem is getting it done.
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Higher interest rates are choking much-needed investment, which was almost flat in the first quarter of this year and grew just 4.1 percent year over year, as overall economic growth slipped to 7.8 percent.
The stock market is sliding shares are down more than 14 percent this year,
making India the worst-performing market in Asia. That in turn makes it more difficult for companies to raise the capital they need to invest.
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Indian economy starts to slow down - The Washington Post