7/23/2019 India vs Major Emerging Economies

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Health of India’s Economy vs major Emerging Economies

The Indian economy recorded 7% GDP growth in the first quarter of the financial year 20151!" #conomists are confused on whether to $e ecited a$out this

growth num$er &which has come amidst a gloomy glo$al economic setting' or worry that domestic growth is decelerating from (re)ious (eriods" *ere are a few 

factors that should hel( you decide"

The GDP number in perspective+ ,ast quarter-s 7% GDP growth is $elow the 7"5% figure re(orted for the first three months of this calendar year. as well as the

7"/% recorded for the full financial year 20115" This suggests that economic growth in the country has slowed down. as o((osed to gathering (ace. as it was

e(ected to when the odi go)ernment too o)er" *owe)er. it must $e reali3ed that today. the world economy is much different from the (re)ious fiscal" The

4green shoots- of reco)ery that were emerging then. ha)e $een una$le to sur)i)e for long" lso. the odi go)ernment came in with a lot of internal house cleaning to

do6 only some of which seems to $e done yet" Des(ite this. last quarter-s growth has come in higher than !"7% that was recorded in the same quarter last year" This

suggests that we ha)e made some (rogress. $ut a lot remains to $e done"

Better growth than other emerging markets:  Des(ite a modest 7% figure. India-s growth rate stands a$o)e most of its emergingmaret (eers. namely 

ussia. 8ra3il. Turey and 9outh frica6 and at (ar with :hina" ;hile most of these economies seem to ha)e recently entered a recession. India. which was ne)er in

a recession. seems to $e coming out of its domestic (ro$lems" The crash in glo$al oil (rices and the im(osition of an economic em$argo ha)e left ussia in an

im(o)erished state" The country-s growth rate has $ecome negati)e and the u$$le its currency < has fallen to (arity with the Indian ru(ee" 8ra3il-s recession

dee(ened further last quarter. as the country e(erienced a contraction of 1"=%" any economists $elie)e that :hina too has entered an etended (hase of 

economic slowdown. following a ma>or e(ort $oom" The country had to de)alue its currency twice in ugust alone. and tae des(erate measures to su((ort its

ailing infrastructure sector" any of its cities ha)e turned into 4ghost cities.- as millions of new. u(maret homes ha)e no $uyers" This has forced the go)ernment

to $uy them at a fraction of the original )alue. and resell them for e)en chea(er. as lowcost houses for the (oor" ?ormer I? economist #shwar Prasad e(ects

:hina-s growth to fall to !"5%7% from the dou$le digit rates that the country has $ecome used to" India-s economy. e)en for its challenges. seems much $etter

(laced"

India in a sweet spot+ Des(ite an a)erage (erformance last quarter. India has many things going right for it" The wrecage caused $y inflation now seems to $e

o)er as we ha)e now mo)ed into disinflation" This means that the 8I can ado(t a more (rogrowth monetary (olicy $y introducing another large interest rate cut"

,ower rates will ena$le (eo(le to s(end more and com(anies to in)est more" Growth will also $e su((orted $y the colla(se of crude oil which. at $elow @50 a

 $arrel. is much lower than most economists- year end estimate of @!0!5 a $arrel" dditionally. the commodity su(ercycle is now o)er. which means that India

 will $e a$le to im(ort things at a much lower cost than earlier in the decade. to su((ort its growth" *owe)er. with the ru(ee falling to a two year low. this incenti)e

 will $e somewhat limited" 8uoyed $y these factors. foreign com(anies in)ested @ ="5 $illion in India. $etween (ril and Aune this year" This is an increase of /1"%

o)er last year"

Key domestic concerns remain+ Des(ite (romising $ig. the BD go)ernment has achie)ed little with regard to (romoting India-s economic growth" The

(resent session of (arliament was e(ected to $e a landmar session as two critical $ills G9T and ,and 8ill were slated to (ass in it" G9T will rationali3e indirect

taation related to manufacturing. trans(ortation and sale of goods and ser)ices. in India" It is widely touted as the final $it of legislation that would mae ?DI in

retail wor in the country" The ,and 8ill will mae acquiring land for industrial and infrastructural (ro>ects easier" It will ena$le wor on many stuc (ro>ects to

restart. and facilitate many new (ro>ects to commence" It is unliely that either $ill would (ass in the current session of the Parliament" failure to get these $ills

(assed could ha)e an ad)erse effect on (ri)ate sector in)estments going forward" :I9I, e(ects in)estment in 22 large industries in the country to sli( $y C% in

the 12 months ending arch" more committed (ush on the reforms front will ins(ire confidence in the (ri)ate sector and ena$le it to in)est more in the economy"

This is es(ecially true when growth o((ortunities eternally are limited"