Page 7 - CII Artha Magazine

Focus Story

Global production snarls due to export slowdown, which has depreciated by over 7.0 we navigate these challenges,

with the government
per cent in the fiscal so far
intermittent lockdowns. This
poses downside risks to
expected to continue with
buffeted by headwinds from
has prompted the World Bank
India’s growth prospects for
the current year. While the
to cut its growth forecast for
tighter global financial
the bulk of the heavy lifting,
Challenges current year from the price from their recent highs sentiment, and a infrastructure, as well as
conditions, risk-off
mainly in terms of
coming off the crude oil
China to 2.8 per cent for the
will have a sobering impact
strengthening US dollar.
previously forecasted 5.0 per
spend on welfare measures,
on India’s import bill, a
cent growth rate.
A depreciating rupee raises
to support the rural and
greater slowdown in exports
informal economy.
risks of imported inflation,
Amidst this heightened global
offsetting some gains from
due to tepid external
to the Indian uncertainty, India remains in a demand vis-à-vis imports, is the recent fall in A DECLINE IN
sweet spot with growth rates
expected to exert a widening
international commodity
prices. The RBI’s
expected to be in the order of
pressure on the current
GLOBAL GROWTH IS
interventions in forex
account deficit this fiscal.
7 per cent+ in the current
markets to limit volatility in
year. That said, we are
ALREADY
REFLECTING IN
certainly not decoupled from
the rupee, have led to the
Furthermore, volatility in
Economy the global economic turmoil. global financial conditions, drawdown of reserves. EXPORT SLOWDOWN,
across assets (equity, debt,
WHICH POSES
Nevertheless, even as
rates), is showing its effect
The factors underlined above
DOWNSIDE RISKS TO
domestically too, with equity
multiple global risks are
pose spillover risks to India’s
INDIA’S GROWTH
hovering on the horizon,
indices sliding, yields rising,
macros: slowdown in global
and rupee falling. The rupee
much will depend on how
growth is already reflecting in
P rospects for global commodity price shock,
aggressive monetary
growth this year and next
have progressively been tightening by the US Fed and
revised downwards. The other large central banks, UNSURPRISINGLY,
International Monetary Fund spiralling energy prices in THE INCOMING
(IMF) expects global GDP Europe, disruptions caused by DATA FROM THE
growth at 3.2 per cent for China’s zero-Covid strategy, KEY GLOBAL
2022 and 2.7 per cent for have dealt one body blow ECONOMIES DOES
2023 (WEO October 2022), after another on global NOT LOOK VERY
revising down the projections economic outlook. The PROMISING
for 2023 by 20 percentage prognosis for the next year is
points compared to the July not too good either, with
2022 Outlook. Starting with recession/stagflation-like risks Unsurprisingly, the incoming a rise in US Treasury yields,
the Russia-Ukraine crisis, the strengthening. data from the key global sliding global equity markets,
economies does not look and depreciating currencies
very promising. The world’s across advanced and
Global growth is slowing down largest economy – the US is emerging economies.
2022 2023 facing the prospects of a
Country/Region 2021 stagflation, described as a Our once fancied neighbour
(Forecast) (Forecast) scenario of falling growth China too finds itself in
United States 5.7 1.6 1.0 along with multi-decadal high economic dire straits. Its
Euro Area 5.2 3.1 0.5 inflation levels. The US Federal fanatical zero-covid policy has
Japan 1.7 1.7 1.6 Reserve has raised the key led to prolonged lockdowns
United Kingdom 7.4 3.6 0.3 policy rates by a cumulative in the biggest cities, ports and
375 basis points this year so
manufacturing hubs. It grew
Emerging and Developing Economies 6.6 3.7 3.7 far in a bid to tame inflation. by a paltry 0.4 per cent on
Brazil 4.6 2.8 1.0 Other major central banks, annual basis in the April-June
China 8.1 3.2 4.4 including the European quarter before recouping to
India 8.7 6.8 6.1 Central Bank, have adopted a 3.9 per cent in the
World 6.0 3.2 2.7 similar hawkish stance. This subsequent quarter, due to a
has caused volatility in global massive collapse in its real
Source: IMF World Economic Outlook, October 2022 financial conditions, including estate sector apart from
06 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 07
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2022 DECEMBER 2022