Can India Overtake the US and China as the Strongest Economy?
Author- Prakash sharma
According to the data released on the 30th of August, India’s gross domestic product or GDP has plummeted to a 6 year low. This decadence has prepared quite an ambiguous ground for investors who up until now saw enormous potential in the Indian economy. Further considering the fact that India is currently somewhat struggling to meet its fiscal targets, it seems rather unlikely for new investors to exhibit an unadulterated faith by taking a plunge into the Indian markets. Red flags of an imminent slow-down were raised back in the financial quarter of April-June 2019 when the GDP boosted 5%, but the government didn’t pay much heed to that. This is directly rendering the economy vulnerable to prominent threats.
The GDP growth was at 8 percent in the same quarter of 2018-19.
Gross Value Added (GVA = GDP – Taxes), which is the more pragmatic proxy to measure economic activity, rose 4.9% in April-June 2019, in contrast to the 7.7% in the same period last year and 5.7 percent in January-March this year.
Figures from around the world, cumulatively don’t paint quite a pretty picture of the global economy, which is on the cusp of a recession. It is not the Indian economy alone that raises concerns, the US economy also slowed slightly more than was earlier anticipated in the second quarter.
In an attempt to stay ahead of the situation, the current dispensation has disclosed countermeasures, formulated to prevent decadent growth. For instance, reforms in the public sector banking space and abrogating soaring tax surcharge from foreign investors. Despite the operose invested in strategizing the measures, they seem inefficacious.
Stock Market
The savant stock market traders believe that the time lag between yield curve inversion and recession might stretch to several years.
According to the projections emerging from data analyzed by share trading and investments experts, India will continue to see the growth trend. However, there is a mammoth of ambiguities that needs to be dealt with first, with respect to taxation. Furthermore, due to comparatively lower investments in Nifty and Sensex could mean the scarcity of funds with the broker, which shall result in an increased number of margin calls to cover the losses incurred.
Mr. Vijay Verma, who is at the helm of affairs at ISM – Institute of Stock Market said that taking the tax load off that was levied on the Foreign Portfolio Investments (FPIs) was quite a commendable move. He further held weak household spending and muted corporate investment as the major culprits of the economic slow-down. Furthermore, A rate cut, which could be cumulative of 40-50 bps in the current financial year; could come in as a consequence of the slow down in the economic growth and precisely that should add an impetus to the rate-sensitive sectors, Mr. Verma said.
Having spoken to prominent economists, it is clear that amidst all the speculation and vague analysis, the major deterrents of the slow-down are steep fall in manufacturing and the subsequent consumption figures.
Conclusion
A silver lining has been pointed towards by the Global Investment Bank, which is of the belief that the revival of the economic growth could happen in the second half of Financial Year 2020 because of a sequential uptick and a low base. This projection is based on the model in which RBI shall be expected to slash the rates by approximately 50bps over the 4th quarter and the 1st quarter of the year 2021, which shall push the repo rate to 4.9%.
What do you think?
How strong is India’s economy? Can India overtake the US and China as the strongest economy? Can India overtake China? How many people live in India? What is the workforce in India?
Can India overtake the US and China as the strongest economy? Can India overtake China?
Comment your thoughts…