NEW DELHI: 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 may be faltering.
Enter India, once dubbed the Broken BRIC, as the core group is known, now poised to become the fastest-growing G20 economy, expanding at a respectable seven percent, with its finances nourished by cheap oil.
“If you look at the growth numbers, India is definitely doing better than these other economies,” Kunal Kundu, an economist at Societe Generale in Bangalore, told Agence France-Presse.
“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 five percent below a year ago.
Economists say underlying growth remains fragile, and question whether the re-calculated figures that show India’s growth rate has caught up with China’s can be trusted.
But as turmoil convulsed global markets this summer, wiping trillions of 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.
Now the magic growth engine is sputtering out its worst GDP figures since 1990, Beijing says; analysts say the truth could be even uglier.
When the Middle Kingdom’s appetite waned it cast a chill over Brazil, whose economy depends on selling commodities to China and a handful of other big customers.
Prices have drooped, with the Bloomberg Commodity Index that tracks 22 raw materials falling to its lowest in 16 years in August, and not only are prices low, no one is buying like before.
“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. AFP
At the peak of the boom in 2010 the one-time South American superstar grew 7.5 percent; economists now expect it to remain in recession in 2016, 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,” Oleg Kouzmin at Renaissance Capital in Moscow said. He expects Russia’s economy to shrink by four percent this year.