India vs. other Asian Economies

There are few significant differences between Indian Economy and other major Asian economies, lets analyze few:

a). Current account deficit - India has a current account deficit. As oil and fertilizer prices go up, the deficit increases further. Other Asian economies (like China, Japan, Korea, Taiwan, Singapore, Vietnam etc) have a massive current account surplus which they can use to finance growth, India relies on capital flows - FDI and FII. During 1990s, the East Asian crisis emerged as those countries financed their growth through capital flows, not from any forex reserves (as they did not have much in their kitty then), they were devastrated as world pulled back their money out of Asia. India survived then and is not that worse even today - forex reserves are high and FDI flow remains strong. But still, its a concern.

Benefit of having current account surplus is that forex can be used to contain domestic inflation. So China can led yuan appreciate to control inflation because there is a massive current account surplus, India can't.

b). Fiscal deficit - With increasing wages of govt employees (6th pay commission) and subsidies on oil and fertilizer, the fiscal position of India can become very bad soon. If this continues longer, govt will need to cut down on its spending. Whether that will be subsidies or investments is anybody's guess. Most likely, it will be a mix of both.

Surviving a possible recission is important for an economy. But any recession requires multiple shocks. In 2001, there was tech meltdown, Corporate bankruptcies like Enron-Worldcom, junk bond blowup and Sept 11. This time, we had subprime blowup and the credit crunch. This time may be we are on the verge of an oil shock. Only time will tell how these mighty economies steer away from testing times.