India at front of world economic stage
October 8, 2010
India is enjoying some time at the centre of the international stage courtesy of the Commonwealth Games. Despite the bad press about construction difficulties and lack of preparation in the lead up to the games, now that the sport is underway the attention has clearly shifted. But for those interested in the economic story of India, this week’s release by the International Monetary Fund (IMF) of the World Economic Outlook is much bigger news.
In Australia it is well understood the effect China’s growth and therefore insatiable appetite for our resources is having on our domestic economy. But India’s growth story is just as remarkable. In its World Economic Outlook, the IMF is forecasting GDP growth in 2010 of 10.5% for China with India expected to grow at a similar supersonic pace of 9.7%.
While China remains the dominate force in the world emerging markets with an economy four times the size of India’s, it has been predicted that by 2013 India’s growth rate could well surpass China’s. This is supported by India’s leading indicators – the production manufacturing index and measures of business and consumer confidence – all continuing to point up.
In most economic commentary regarding growth since the global financial crisis, discussion has been of a two-speed global recovery. But the IMF report identifies three distinct economic groupings. The first of these groups is comprised of emerging economies. The IMF is predicting growth of above 5% in emerging Asia (including China and India) for 2010. The emerging economies also include Latin America with growth of about 7% lead by Brazil. The Middle East and North Africa have also recovered strongly, although mostly on the back of recovering oil prices.
The second group identified in the report are the countries expected to grow by between 2 -5% a year. Australia falls in this group (although is recently one of the stronger performers) along with New Zealand, the US and Russia. But of most concern for the global economic recovery is the Eurozone, with the IMF predicting little or no growth. It is this final group of countries which is continuing to threaten the fragile economic recovery since the end of the global financial crisis.
It is clear that emerging markets were less affected by the global financial crisis because the seeds of the crisis were sown within the developed economies’ financial systems. But nonetheless the emerging world economies’ growth has been impressive since the crisis and according to the IMF is likely to persist for some time.
So in a few weeks time when the Commonwealth Games are over and all the athletes and media correspondence have returned to their home countries, it is inevitable that India will remain in the world spotlight, though for a different and possibly much more exciting reason.