The performance of Indian economy in terms of standard economic parameters like GDP, consumption, investment, per capita income, inflation, current account deficit and fiscal deficit can be termed as reasonably good specifically while comparing with the result sheets of other economies, advanced or developing.
There are, however, concerns on the sustainability of these indices in view of some of the downward risks that emerge on the global scene. The publications of World Economic Outlook by International Monetary Fund (IMF) and Asian Development Outlook by Asian Development Bank (ADB) in quick succession in April 2019 have mentioned some pertinent facts on the course of economic growth in 2019 and beyond.
Although, the evaluations by two separate agencies do not follow similar trend, the concluding convergence of assessments is apparent. The global GDP growth is slated to go down to 3.3%, dropping from 3.6% in 2018 displaying a synchronised slowdown by 70% of global economy.
IMF has projected 3.3% GDP growth in 2019 would go up to 3.6% in 2020. India with a GDP growth of 7.1% in 2018 is slated to grow by 7.3% in 2019 and to 7.5% in 2020. ADB, on the other hand, has projected Indian economy to grow by 7.2% in 2019 and by 7.3% in 2020 with an inflation ranging between 4.3-4.6% in 2019 and 2020.
Steel, being the largest category accounting for stressed assets, is going to experience a favourable scenario in the current year and the next, in India. However, ADB report has expressed concern on fluctuating trend in PMI in manufacturing in India, rising from 52.4 in January to 54.3 in February and falling to 52.6 in March’19. Exports growth is slower as compared to last year. Indian steel export in FY19 at 8.5 MT is around 26.4% lower than the previous year’s level.
The second area of concern relates to the poor growth in exports. India’s share in global exports that went up from 0.7% in 2000 to 1.7% in 2017 is below 12.7% share by China, 3.9% share by Japan and 3.2% share by South Korea.
The distorting elements continue to be the escalation of US-China trade conflicts, economic stress in Argentina, Turkey, Venezuela, poor growth in auto sector (with new emission standards) and manufacturing in Germany, financial tightening in countries, including China and others.
These downward risks have led to lowering of the growth prospects in the US (1.8% in 2019 and 1.7% in 2020), Latin America, UK (more due to Brexit uncertainties, albeit extended for another 6 months), Canada, Australia and Russia. The silver lining is the belief that the slowdown in global economy may reverse in H2 of 2019. The problem centres round the insignificant growth momentum seen in elements of real economy. Industrial production is down. IIP in India has grown 4% during the first 11 months of FY19, while gross fixed capital formation as a percentage of GDP (constant prices) moves up to 32.5% in April-December’19.