India And Global Economy
Over the last 5 years
Over the years we have witnessed a slowdown in the Indian Economy characterized by low GDP, charges of corruption and lack of reforms. The global economy too has not fared well either. The scars of 2008 recession can still be seen in the market coupled with lack of reform measures. Moreover the post 2008 era was marked with controversies and allegations against the Government. We have also witnessed the Rupee hitting the all time low of 68.82/dollar last August. The US Federal Reserve tapering bond buying program has also hit the emerging markets very hard. Major reform bills could not be tabled in the Assembly for much of the time. Inflation and Lack of employment generation in the manufacturing sector further dented the economy. Overall, the last few years have been challenging for most of the nations.
Let’s look at the GDP growth of India over the last 5 years as compared to some of the other developed and emerging economies.
Source: World Bank. 2013-14 data is projected. GDP at market price.
Here we see over the 5 years none of the economy has been able to show consistent growth. Almost all the economies have seen slowdown in the last 5 years.
India also could not escape from the after effects of recession and governance issue also hit India in the worst possible way. The 2G spectrum and Coalgate fiasco turned away foreign investor from India to other emerging markets. The lack of reforms also had its share in the slowdown. The investors became susceptible with their investments. Thus the overall period remained gloomy with little amount of growth and not much could be achieved with regard fiscal deficit as well.
Now let’s look at the Inflation trend over the same period.
Sources:www.inflation.eu Percentage of Inflation on CPI. *Figures till Dec’13. Yearly Averages Taken.
In the above chart clearly we can see India facing the brunt of high inflation as compared to other nations. The factors which went against India were the rising prices of Crude exported added with the value of Rupee depreciating considerably in the Global Market. Clearly the inflation was alarmingly high which compounded the miseries of the economy. The FIIs pulling out the fund also added to the woes of the economy.
However come February 2014 things don’t look all that bad for India. It seems that there is some control over the Macro Economic issues. The factors which make 2014 look promising for India are:
Rupee has appreciated almost 10% to `62.20 from an all time low of `68.82 last August which is a remarkable achievement considering the other emerging markets across globe seem to be reeling under pressure.
Inflation (Consumer Price Index) has touched a 2 year low in the month of January to be at 8.79% which shows that some sort of stability with the prices being under control.
Stock Market has been performing well and is hovering near about its all time high.
India has also been able to withstand the US Federal Reserve tapering its bond buying program unlike the other emerging markets. Even China observed the slowing down of the economy during this period.
The Current Account Deficit (CAD) is also expected to be contained around $45 billion which is great considering the stress faced by the other emerging markets.
In the recent interim Budget 2014 presented by Mr.P.C Chidambaram fiscal deficit for the year has been capped at 4.6%.
Thus we can look forward to have a better 2014 with more employment opportunities, growth, investments and lower deficit.With a stable government at the Centre the prospects for Indian Economy will only get better.