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Is the world Economy really sinking? How India can pull off a miracle

Is the world Economy really sinking? Latest Chinese export Data suggests otherwise.

How does India catch up with its Asian Neighbour and pace its growth trajectory?

The economists community of the US and India have one thing in common i.e. their forecast and assessment of the economic fallout in the months to come. Many prominent voices in the USA and India have a word of caution for Trump administration there and Modi government here respectively about the slowing economy and a possible recession that may set in early 2020.

November month Export Data of China reveal a rather cheerful note of marginal fall of exports to US which was well compensated by increased export to France and Africa. China exported goods & services worth 221.7 Billion US$ compared to 212.9 Billion US$ in the previous month. With the cooling off of the trade tensions with US, though deal was not reached yet, China exported goods worth 37 billion to US a marginal drop from an average of 38 Billion dollars, which was well compensated by increased exports to France and Africa. With President Trump tweeting about reaching phase one of Trade deal on Friday 13th December 2019, the world trade is poised to embark on a new found vision backed by clarity on the future of Brexit through the thumping win of Tories in UK elections. With Europe joining the League of Nations with positive growth trajectory, pessimists on either side of Atlantic may find few takers for their bleak projections about the slowing of world economy.

When good things happen, they happen in droves. Saudi Aramco’s market capitalization zoomed past 2 trillion Dollars, after the listing of its IPO, bringing cheers to the Middle Eastern investors in Particulars and the world markets in general. This trend may add positively to the global growth sentiment that may transform for better, post the US-China Trade deal and a decisive BREXIT time frame.

The Monetary Policy committee (MPC) of Reserve bank of India meets in the final month of every quarter and reviews the economic activity, credit off take, growth pattern and prospects for the future. The culmination of the meet leads to the announcement of a tentative GDP growth rate of the country. This month’s MPC meet announced the growth rate of country’s GDP at 4.2% for the third quarter and over all for the year at 5.2%. For a country with an economic size of 2.68 Trillion US$, 5.2% growth is pretty much decent and may be one off the shining bright spots of the world economy, next only to that of China.

For the past 5 months the country’s exports have not dipped below the 25 billion Dollar mark and the imports have not crossed 40 billion dollar mark pointing to the standstill position, affecting the GDP growth rate projections. As long as these figures remain in these range, no danger for the country to go into recession mode. But the take off from this position is imperative for the government to realize its dream of taking Indian economy past 5 trillion mark. Modi government can do a lot to give wings to this dream and propel the growth engine from stall position.

Yet the political dispensation in India, both ruling and opposition spars over the growth rate without really addressing the core issues that may propel the economy into the fast mode. The ruling party has the required mandate to do whatever that may take the country out of the recessionary trends, yet it unwittingly draws itself into the quagmire of political slugfest without realizing the damage it can inflict on the Brand India. In a democratic set up opposition had a space to corner the government on key issues and the ruling dispensation should have the canny knack of not falling into that pit and should always focus on its job of reviving the economy to its intended growth trajectory of 8%. The cacophony of criticism and counter criticism to nullify that, is taking away the focus of the administration to fix the faltering growth. The disruptive mechanism of the Indian polity, be it the local political elections, administrative decisions on new citizenship bill may push the economic recovery to the corner.

The slew of incentive measures announced by the Indian finance Minister and the positive trends of the NPA recoveries by the banks certainly improved the confidence of the corporate India. The proposed review and announcement of new personal Income tax slabs may spur a new wave of consumption pattern in the country. But the need of the hour is the stability of the political dispensation of the country and the ruling party may have to take the initiative in minimizing disruptive trends that directly impact the economic recovery.

Prime Minister’s announcement of 100 lakhs Crore investments in the Infrastructure sector, during Independence day speech on August 15th is yet a non starter and that single move by the government may take the Indian economy to the next level and stir the momentum on multiple fronts.

With global tail winds pushing the world economy to the forward mode, India should seize the baton and move forward. Really testing times for the vision and foresight of the Indian leadership.

Rambabu Vankayalapati

Economic and Political Analyst based out of Hyderabad @ India

can be reached at FB Rambabu vankayalapati



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