The spice trade between India and Europe was the main catalyst for the Age of Discovery. The inscription shown, is a Sanskrit invocation of Lord Shiva. The combination of protectionistimport-substitutionFabian socialismand social democratic -inspired policies governed India for sometime after the end of British rule. The economy was then characterised by extensive regulation, protectionismpublic ownership of large monopolies, pervasive corruption and slow growth.
Share With the Lok Sabha elections less than a year away, it is a tricky time to set a stable economic narrative. An objective analysis of forces shifting our economic realities is much wanting.
An analysis which, when stripped of all embellishments, simply tells us how are we really doing? I will humbly attempt to at least contextualise a few things. Would GST turn out to be a net positive?
Whether RERA would bring, or is bringing, in more transparency in real estate?. Also, excluded are comparisons across preceding political tenures.
Because while analysing existential factors with a historical baggage is an intellectually stimulating exercise, I am more comfortable in presenting a more current, apolitical and technical version of things, using data to highlight the actual state of the economy along with its expected trajectory.
The logic stems from the reality that policy actions are already set in motion. Let us discuss their effects instead of their basis. So, what are the set pieces here? The most significant trend driving global economies since late has been an unprecedented drop in interest rates in the rich world.
Be it the Federal Reserve, the Bank of England, or the European Central Bank ECBthe combination of bond-buying and a deliberately loose monetary policy gave the rich world access to ridiculously cheap capital for a large part of last decade. Japan in the Far East ventured towards negative rates in joined by ECB after suffering decades of stagflation, which technically meant investors would be charged for depositing their money in Japanese and European banks see chart 1.
Rates in major emerging markets, including India, were moving in the opposite direction, hitting highs from to early Rising domestic inflation, driven by increasing crude oil prices, supply chain inefficiencies, and a growing consumption base resulted in a high rate environment.
This rate differential meant global capital flows in the early and mid-segment of last 10 years moved from the rich world to the emerging markets.
Foreign investors were flocking to Asia hungry for yields, leading to significant rallies in domestic equity and bond markets. The last segment of the bygone decade has been different. The rich world interest rates with the US taking lead have been tipped to rise since The Federal Reserve has already announced its seventh rate hike in past three years.
Europe will follow suit, albeit in a more gradual manner from onwards see chart 2. Key emerging markets during the same period have begun to loosen monetary policy leading to rate reductions.
The divergence of early and mid-decade is repeating itself, albeit now in the opposite direction Chart 1. The result is a capital flight back to the rich world. The foreign investor flight seen in India is a case in point see chart 3a, 3b.
Although there are noises around monetary tightening coming back to the Emerging world considering a second crude oil price rise in the decade with recent consecutive rate hike by RBI as a reaction — capital outflow, especially in the Indian scenario, should not be expected to correct itself immediately.
India would hence need to depend on domestic investors and liquidity to fund its growth. Crude joke India sources more than 80 per cent of its annual crude oil requirement externally, making us one of the largest oil importers in the world.
Being a relatively price inelastic product, such an external dependence makes crude oil a key force driving our macroeconomic realities.
Domestic retail inflation is at a 5-month high. Interest rates are expected to go up. INR is at an all-time low. Assuming the upward or moderately upward trajectory of oil continues, is that a sufficient precedent to be worried? Our fiscal deficit is already widening thanks to petroleum subsidies etc.
Petrol and diesel pricing pains can exert additional pressure on excise duties leading to further revenue loss. Another pain point is the rise in interest payments on government debt.
Ten year government bond yields have been continuously increasing chart 5 since the beginning of this year due to a weakening Rupee, which is driven off other macro factors. These higher interest payments would only constrain government spending further. Slowing Investment And we do need investment, especially with a wave of capital outflow thanks to a rate differential with respect to the rich world as illustrated earlier.Jun 29, · China and India are perceived to be the worst emitters of carbon dioxide.
But much changes when adjustments are made for population, GDP levels and carbon consumption per person The world economy.
These are lists of Indian states and union territories by their nominal gross state domestic product (GSDP). GSDP is the sum of all value added by industries within each state or union territory and serves as a counterpart to the national gross domestic product (GDP). The current scenario of Indian economy has been characterised by optimistic growth and strong macro-economic fundamentals, particularly with tangible progress towards fiscal consolidation and a strong balance of payments position.
Current State of Indian Economy – June EXECUTIVE SUMMARY GDP growth GDP growth figures for Q4, , highlight an unmistakable downward trend. While in Q1, , GDP grew by percent, in Q4, , GDP growth came down to percent.
The M&A activity in India increased per cent to US$ billion in while private equity (PE) deals reached US$ billion. Some of the important recent developments in Indian economy are as follows: Exports from India increased per cent year-on .
Why the current state of the Indian economy suggests it is time to go bearish Ahead of the Lok Sabha polls in , there isn't much to be excited about the state of the economy in the short to.