Tuesday, February 5, 2013

India :No more the 2nd fastest growing?

For a while, India was reckoned as the fastest growing economy, second only to China. And it was being hoped that as China's growth rates moderate, India would emerge at the top slot. But reality suggests we are far away from that. In fact, India is set to lose the second position as well as per the latest global economic growth forecasts from the International Monetary Fund (IMF). Indeed, as today's chart of the day shows India's growth in 2012 at 4.5% is expected to be significantly lower than many other emerging markets and Asian economies such as Indonesia, Philippines and Bangladesh. Of course, these economies are much smaller in size compared to India. But they are set to give stiff competition to India as they are in a relatively better shape. Their i nterest rates are not just lower than India, but also lower than their own interest rates at the time of the Lehman Brothers crisis. As such, exports from these economies are flourishing. On the other hand, India's export growth has been contracting. This is indeed a worrying sign for India. If India does not take some concrete steps to correct this, it could result in a long term disadvantage in global trade.

*IMF's GDP estimates for 2012
Data Source: The Economic Times