During our scholastic days, professors of economics, econometrics, international trade and banking told us that India has an insular economy and hence was immune to global events. In addition, the socialism blanket kept businesses largely away from advanced countries of the West.
How things have changed! Today’s India is far removed from its restricted past, with an increasing number of foreign companies establishing their presence without suffering painful and time-consuming procedures.
Indian businesses have not only become successful traders across the globe but also owners of large enterprises and well-known brands.
It seems there are limits to progress, at least in the short-term, as economies suffer cycles of downturn and depression- or as recently experienced by mismanagement. Europe continues to struggle as the US economy shows signs of revival. New Zealand is expected to fare better this year, while Australia’s political turmoil would impact its economic performance. The global economy, in effect, is in a state of flux.
As the Economist pointed out, investors have fallen out of love with emerging markets. Since early 2014, emerging market stocks have trailed their rich-world peers.
“Currencies are falling; worst-hit is the Russian Rouble, which has fallen by 30% against the dollar this year. The currencies of other biggish emerging markets, such as Brazil, Turkey and South Africa, have also weakened. For such economies, growth is harder to come by. The IMF recently cut its forecasts for emerging markets more than it did for rich countries.”
The currents that sway the global economy presently – the strength of the US dollar; slowdown in China; aggressive money-printing in Japan; stagnation in the euro zone and falling oil prices are less harmful to India than to most emerging markets.
But India is a notable exception to the general pessimism. Its stock market has touched new highs. The Rupee is stable and the IMF nudged up its 2014 growth forecast for India to 5.8%. That figure is still quite low: growth rates of 8-9% have been more typical.
But in comparison with others, it is almost a boom.
In the Indian context, the performance of the federal government, more specifically its stability and public perception, is an important barometer for foreign investment. On such a score, the current government, led by Narendra Modi, inspires confidence.
Mr Modi’s Bharatiya Janata Party (BJP) won a thumping victory in elections on a pro-growth platform. Since then the BJP has strengthened its position in some key states.
But so far, reform has been piecemeal, although procedures for government approvals have been streamlined. The powers of labour inspectors have been curbed and civil servants now work harder. That has been enough to sustain hopes of further and bigger reforms.
You could expect a down-to-earth, free-of-frills and true-to-God account of the state of the Indian economy from three experts from India on March 13 in Auckland. As we reported in our February 15 issue and in this edition, Nandan Nilekani, Dr Reuben Abraham and Ajay Shriram will be here to explain more.
While India offers immense potential for growth with its youthful population, developments in similar economies may have an impact on its progress.
Why is India doing better than most emerging markets?
We have some answers, but we would wait for the Indian experts to offer their view.