During the July September quarter of this fiscal year at 4.5% the Indian economy experienced its slowest growth rate in nearly seven years. India’s economy has grown at a rate of over 7.5 percent per annum for 20 years which makes this less than 5% grow for an entire year seem more like a recession rather than just a slump.
India has made it clear that about 2024 it wishes to be a 5 trillion dollar economy and to 10 trillion dollars by the early years of the 2030s. With a growth rate of less than 5%, it appears that this ambition to be a 5 trillion dollar economy by 2024 has been stalled at least by a year.
Demand for India’s exports has also slowed down in recent months due to the decrease in global economy. During the September quarter the manufacturing sector contracted 1 percent which is similar to the contraction in the factory output as well as the coal sector numbers
On the other hand other services including public administration and defense grew at its highest growth rate in nine quarters at over 11 percent.
Currently China’s 14 trillion dollar economy is 5 times bigger than India’s 2.9 trillion dollar economy. By 2027, India’s expected to have a higher population than China. In order to maintain this large population India would have to grow at a rate of 8 to 10 percent.
Although for the July September period China’s economy grew only by a mere 6 percent which was its lowest rate since 1991. Their GDP growth exceeded double digits for a decade and was above 10 percent between 2003 to 2007.
And that is why for India it is necessary to go full force in order to get the economy back on the right track and on the rise once again. The GDP is essentially the private consumption expenditure government expenditure investment and net exports put together. If the government expenditure from GDP is left out this leaves the non-government portion of the economy.
From July September this grew at approximately 3 percent which should be a worrying signs. On the contrary economies such as the Vietnam & Bangladesh that tend to rely on a lot of exports appear to be doing fine.
Over the last quarter, Vietnam grew at a rate of over 7 percent and Bangladesh could be approaching two consecutive years of 8% growth.
It is not expected that the global economy will help in the end us. The growth rates are slowing around the world and the International Monetary Fund has cut its global growth forecast from 3.2 percent to 3 percent in 2019.
Since 2018 the global trade volume has been decreasing at a steady rate because of the unknowns and variability surrounding trade policies. According to the World Trade Organization merchandise trade volume growth will likely decrease to 2.6 percent in 2019 compared to 2018 when it was 3 percent. That’s not everything, uncertainties regarding trade policy and events regarding geopolitics a further weakening the Chinese economy as numerous companies across the globe are looking into other destinations for manufacturing.
The complexities of Brac Siddhant increase in geopolitical tensions throughout the Middle East have caused turmoil in energy prices. When it comes to economic growth and differences in opinions should be expected. Perhaps that is why Moody’s has lowered India’s outlook from stable to negative but SNP global has reaffirmed India’s sovereign rating at triple B – with stable outlook.