I have seen that forecasts are being made about the recession in the US and therefore slowdown in India. Some reports even said that India is in the middle of a slowdown now. I wonder why such an exaggerated view?
There is a definitely a slowdown in the US economy. I am not sure this has turned into a recession yet.
Emerging economies (BRIC economies, Ukraine, Turkey, Argentina, and Chile etc.) are now contributing for a very large proportion of global growth. India, China and Russia alone contributed over 30% of the growth in the global economy in 2007. This is totally different from the late 1990s when the US economy had a central role in global growth. In fact the weight of the US economy in the entire global economy has been declining since 2001. At the same time the weight of the BRIC economies (Brazil, Russia, China and India) has been rising steadily.
In 1999 the US economy represented 30.91% of world GDP, and in 2007 this percentage is down to 22.4%. In 2000 the US economy accounted for an impressive 40.71% of global growth, and in 2007 this share is down to 6.43%. So there are obvious reasons for thinking that this time round the impact of any US recession will not be as acutely felt in some parts of the world.
The fact that the rupee has risen considerably is in itself an expression of the confidence levels imposed in India by foreign investors.
Interdependencies between the US economy and emerging economies like India and China has reduced considerably over the last decade. Thus, the effect may not be as drastic as would have been the case in late 1990s.
Some specific sectors like IT Enabled Services sector, Tourism sector etc may be a hit. Also due to appreciation in rupee exporters are pushing government to intervene and rate cut. But what is being forgotten is the fact that stronger rupee will cut the import bill.
If things don’t get worse than already predicted in the US housing markets, the world economy will only show a modest slow down in 2008. It follows then that India should still show substantial growth and there should still be bullish trends (a little moderated and realistic) in our stock markets.
In summary, at the macro-level, a recession in the US may bring down GDP growth, but not by much. At the micro-level, specific sectors could be affected.
For US firms, who have long looked at China as a better investment destination, this may be a good time to look at India as well. After all, 350 million people with purchasing power cannot be ignored. This is not a sales pitch for India, but only a gentle suggestion to US corporations.
Subscribe to:
Post Comments (Atom)
4 comments:
Jai Ho! Deepak Baba ki!
Good one, but tell me from where have you copied this from
Some Sectors may be hit by the so-called U.S. economic slowdown (particularly, the IT and ITES). This is a large Employer, especially for the Indian Middle Class, and cannot be ignored completely.
But surely, India is now on a path to build itself as an Economy with Impact. In recent times, there has been a marked increase in Economy Indicators like Manufacturing Sector (the automobile industry, for example).
So rather than speculating on the repercussions of U.S. on India, the thing to realize is the potential of India on creating an Impact on the world.
This can only be achieved if we have ABLE LEADERS who focus on issues, rather than destroying resources (as the present conditions show.. ;) )
BUT...as you mentioned, India is surely moving ahead and gone are the days when we would depend on the U.S. to decide the directions for our economy.
Post a Comment