A decade ago, the global economy slipped into a deep abyss,
contracting by more than 2.5% in 2009, as compared with a over 4% growth
recorded during 2004-2007 period and a still positive growth of over 2%
recorded in 2008. The extent of the slowdown could be gauged from the fact that
over 100 countries (including 33 developed countries) all across the world
recorded contraction in GDP during 2009.
The global financial markets had frozen; large banks were
collapsing; some European and Latin American countries were on the verge of
defaulting on their sovereign obligations and needed to bailed out by IMF.
Amongst all this chaos a group of four developing countries
Brazil, Russia, India and China (BRIC) emerged as the savior. These countries
recorded sharp growth recovery in 2010 and saved the global economy from
slithering into a deeper recession, which many feared could have been much
worse than the great depression of 1930s.
A decade later, all four BRIC countries are struggling with the
growth. As per the latest growth statistics Brazil, India and China are all
growing at a pace much less than 2010. The global institutions that lauded
these economies for being engine of global growth in 2009-10, are now holding
emerging economies, especially India, responsible for pulling down the global
growth.
IMF on Monday downgraded its growth estimates for India for next
2 years. As per IMF, Indian economy is now expected to grow by 4.8% in 2019;
5.8% in 2020 and 6.5% in 2021. These estimates are subject to fiscal and
monetary stimulus by the government and subdued oil prices due to lower global
demand growth.
Accordingly, the global growth would reach 3.3% in 2020,
compared to 2.9% in 2019, which would be the slowest pace of recovery since the
financial crisis a decade ago. This slow recovery in global growth in 2020 is
highly contingent upon improved growth outcomes for stressed economies like
Argentina, Iran, and Turkey and for underperforming emerging and developing
economies such as Brazil, India, and Mexico.
The International Monetary Fund's (IMF) Chief Economist Gita
Gopinath reportedly told media in Davos that "We’ve had a significant
downward revision for India, over a 100 basis point for each of these years.
It’s probably the most important factor for the overall global downgrade of 0.1
percent."
I have no doubts whatsoever that India and China which together
house close to 3bn people, would certainly regain the economic momentum and
become the engine of global growth again. But it would be foolish on my part to
admit that the next couple of years are going to be extremely challenging,
especially for India.
In view of the popular demands from the government in the
forthcoming budget, Ms. Gopinath cautioned that the government must take steps
keeping the fiscal room in mind. She said, “In the case of India, it is
important that the fiscal targets are met, at least from a medium-term
perspective. It is also important that when spending is done, it’s done on
public investment as opposed to consumption spending.”
Ms. Gopinath cited that the poor credit growth, which is a
direct fall out of the NBFC crisis, is one of primary reasons for below par
economic growth. She highlighted that "In terms of the major issues to
deal with, it’s the weakness in credit growth. How do you get credit growth
back up while making sure at the same time that there will not be a second
round of non-performing assets in the future? I think that’s the balance the
government has to work towards."
No comments:
Post a Comment