by Mubasshir Mushtaq
MUMBAI, India
The Indian economy is growing rapidly but with uneven results, experts told Anadolu Agency on Friday.
A full-blown recovery will be 12-18 months away, the Mumbai-based brokerage firm CLSA forecast, after its 18th India Investor Forum on Nov. 18.
India, the third largest Asian economy, recorded industrial growth of 9.8 percent in October as consumer products and capital goods performed well, according to the data released from Central Statistics Office (CSO)on Friday.
At a time when growth is falling sharply in most of emerging economies across the world, India’s GDP grew by 7.4 percent in the last quarter, which ended on Sept.30, according to a report from the CSO on Nov. 30.
However, economists said that such good performance was not uniform across all sectors.
“The Indian economy paints a mixed picture. The economy is recovering at a moderate pace,” D.K. Joshi, chief economist at Crisil, a global analytical company in Mumbai, told Anadolu Agency on Saturday. On the micro-level, the economy was not doing as well, he added.
“There is a disconnect which some of the micro-indicators have with GDP growth,” Joshi explained.
“The performance across sectors is not uniform. For instance,tax collection is doing very well. It correlates with GDP growth. Industrial production has started rising. But bank credit and other indicators like export growth - they don’t seem to correlate. So its a mixed picture.
Exports have registered a continuous fall: From April to October 2015, the country’s exports have fallen by 17.6 percent compared with the same period last year.
Joshi noted that GDP growth last year was 7.3 percent. “So there is no dramatic change in the growth rate,” he pointed out.
India has also changed its methodology for calculating its GDP in January, which according to some analysts is problematic.
Previously, inflation was subtracted from the GDP, explained Anil Bhatia, an independent economist, told Anadolu Agency on Saturday.
Thus India’s GDP would have been at 5.2 percent if the old methodology used to calculate the GDP were applied.
“This high growth is simply a statistical mirage. While politicians may want to use it for blowing their trumpets, economists cannot take it seriously. It is therefore not surprising that the Reserve Bank of India governor commented that it is premature to take a strong view on these numbers,” Bhatia said.
“And God forbid, if crude prices were to rebound, the Indian economy would suffer higher inflation and a deep plunge in GDP growth (after subtracting inflation from nominal GDP as per the global practice),” Bhatia said.
However, steps taken by policymakers to improve economic performance are having some effect, the economists said.
Last month, India eased up Foreign Direct Investment (FDI) regulations in 15 major sectors like defense, construction, civil aviation and media etc, a step welcomed by Joshi.
“Easing FDI regulations is a positive step. It is like opening a tap. It allows more water to come in. By liberalizing the FDI norms further, India did attract more capital from the outside,” Joshi said.
However, Bhatia said easing up of FDI norms should not be read into “much” at this stage of the global economy.
“Any sharp increase in FDI will strengthen the Indian Rupee and push our exports further down. That’s one inflow the Indian economy can do without at this point in time,” Bhatia warned.
And the Reserve Bank of India (RBI), country’s central bank, cut interest rates by 1.25 percent to 6.75 percent at the end of September.
“The RBI has slashed rates because inflation has come down. That allows them to cut rates. And I would expect RBI to hold on for sometime now to see the rate cuts translate for the economy,” Joshi said.
For now, however, the rate has had little effect, Bhatia said. “Banks don’t trust their banker – the RBI. The central bank rate is 6.75 percent, but banks conduct their business at 7.75 percent,” he said.
Bhatia said off all BRIC economies, India is the only economy managing to stay afloat largely because of the oil price crash.
“India will retain its mediocre status. It will not rise dramatically, nor will sink fast and furious. It will keep trudging along, faltering, one step forward, one step backward in a small circle,” he said.
