Three years ago, India was the weakling of the emerging markets clan, politically stagnant and struggling to grow — but as gloom engulfs other developing economies, the subcontinent is enjoying a moment in the sun.
Brazil and Russia lie deep in recession and South Africa is teetering on the brink after demand for raw materials collapsed, while alarm bells have sounded over fears the China juggernaut might be faltering.
Enter India, once dubbed the Broken BRIC — referring to the BRICS group, which includes Brazil, Russia, India, China and South Africa — now poised to become the fastest-growing G20 economy, expanding at a respectable 7 percent, with its finances nourished by cheap oil.
“If you look at the growth numbers, India is definitely doing better than these other economies,” said Kunal Kundu, an economist at Societe Generale in Bangalore. “China is in slowdown mode, and Brazil and Russia are in trouble because they are commodities-dependent. We are seeing India as the standout.”
It is not all rosy — while low-cost oil and a new way of calculating growth have added shine to India’s GDP figures, its exports remain poor and shares on the Bombay Stock Exchange languish 5 percent below a year earlier.
Economists say underlying growth remains fragile and question whether the recalculated figures that show India’s growth rate on a par with China’s can be trusted.
However, as turmoil convulsed global markets this summer, wiping trillions of US dollars off world exchanges and leading investors to flee emerging economies, India has escaped comparatively unscathed.
“India is looking like an oasis of stability at the moment,” said Mark Williams, chief Asia economist at Capital Economics in London. “It is a very different picture from a couple of years ago when India was at the forefront of concerns.”
As long as China steamrolled along at double-digit pace, covering its landscape with highways and skyscrapers, train tracks and malls, it sucked in vast amounts of raw materials such as oil, coal, iron ore for steelmaking, and cement.
However, when China’s appetite waned, it cast a chill over Brazil, whose economy depends on selling commodities to China and a handful of other big customers.
“Brazil is very affected, more than other emerging countries, especially after what happened yesterday,” said Alex Agostini, chief economist at Austin Rating in Sao Paulo, referring to Standard & Poor's decision to cut Brazil's sovereign rating to junk.
At the peak of a boom in 2010, the one-time South American superstar grew 7.5 percent; economists now expect it to remain in recession next year as political paralysis compounds its woes.
Fellow junk-rated Russia, an oil exporter which lost big when prices halved, faces biting sanctions over the Ukraine crisis, while the number of Russians living in poverty has soared to 21.7 million, or roughly 15 percent of its total population, statistics agency Rosstat said.
“The main impact now comes through China influencing the global economy, commodities and financial markets,” said Oleg Kouzmin at Renaissance Capital in Moscow. He expects Russia's economy to shrink by 4 percent this year.
In South Africa, one of China’s biggest suppliers of minerals, one in four people is unemployed and GDP unexpectedly shrank 1.3 percent in the second quarter. Sales of iron ore have tanked, leading mining companies to announce huge layoffs.
Adding to the pain is a looming US Federal Reserve interest rate rise, which would make riskier emerging markets less attractive compared with the US dollar.
Next to its fractious emerging market cousins, politically stable India looks positively glowing, named by the IMF as one of the few “bright spots” in the world economy.
Low commodity prices are a gift: While cheap crude has pummeled exporters, India, which imports 80 percent of its oil needs, won the lottery.
The ensuing cash windfall has helped the government balance its books and made it less reliant on foreign loans.
“India is in a much better position, we do not have some of the problems the other economies have,” said Arya Sen at Jefferies investment bank in Mumbai. “Not only that, we are probably going to see an acceleration in growth, which is very rare at the moment.”
Yet old problems persist — Indian Prime Minister Narendra Modi’s promised reforms have stalled, with a land acquisition bill abandoned and a key sales tax delayed indefinitely. Labor and investment laws remain agonizingly complex, hindering growth, while outdated infrastructure is badly in need of funds.
While in New Delhi politicians trumpet a growth rate that now rivals China’s, economists warn India is still a chronic underperformer.
Its US$2 trillion economy is five times smaller than that of China, which although not bounding like before, still contributes more than one-third of global growth.
“India should not be complacent, politicians should not be celebrating,” Williams said. “It should be growing much faster. It could have had growth of nine or 10 percent. It could have been another China.”
STEPPING UP: The firm has also asked employees to work in split shifts from this week and to halt all but essential overseas business travel from next month Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has implemented a remote work policy for employees not on production lines in an attempt to curb the spread of COVID-19, the world’s largest contract chipmaker said yesterday. This is the first time in the Hsinchu-based company’s history that it has launched a large-scale remote work policy, joining global technology companies, such as Apple Inc and Google, that encourage employees to work from home. The chipmaker has also asked employees to work in split shifts from this week, it said. As the number of virus infections continues to climb worldwide, TSMC has urged employees to halt unnecessary
A two-hour drive south of Amsterdam in Veldhoven, workers decked out head-to-toe in protective gear toil in vast assembly halls. Before entering the inner sanctuary of the facilities, they meticulously layer on masks, gloves and special socks. A single speck of dust or a hair can have devastating effects on production. The result of all this painstaking process is an environment that is 10,000 times more purified than outside. As COVID-19 grips the world, it might just be the safest place to work right now. The teams belong to ASML Holding NV, which holds a de facto monopoly on the industry of
DBS Bank Ltd yesterday hacked its GDP growth forecast for Taiwan this year to 0.9 percent, down from its estimate of 2.3 percent two months earlier, in light of the COVID-19 pandemic and increasing financial market volatility. The bank’s latest forecast was even lower than London-based IHS Markit Ltd’s estimate of 1 percent, while other research institutes’ projections range from 1.6 percent to 2.6 percent. Taiwan’s economic momentum is being negatively affected by the pandemic, DBS said. The rapid spread of the disease from Asia to Europe and the US has dampened the bank’s previous expectation of a “V-shaped” global rebound in the
DOWNSIDE RISKS: Firms have a ‘very low’ chance of boosting investment returns in the next two years, making it hard for them to improve their capitalization, an analyst said Taiwanese life insurers wanting to improve their capital structure face strong headwinds this year, given prolonged low interest rates and economic impacts derived from trade protectionism and the COVID-19 pandemic, Taiwan Ratings Corp (中華信評) said on Friday. The local life insurance sector also still has high asset risks and such risks are susceptible to market volatility, the local arm of Standard & Poor’s Global Ratings said. Since last year, major financial holding companies — including CTBC Financial Holding Co (中信金控), Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控) — have announced plans to raise fresh capital to