Two exceptions | India, China stand out in global gloom

Two exceptions India, China stand out in global gloom
The Financial Express, June 24, 2009, Page 6

The World Bank’s latest projections on growth sent stock markets in India on a tailspin. They shouldn’t have, because despite the gloomy picture predicted for most economies around the world, India and China come out looking fairly solid. The Bank predicts that growth in India in 2009 will be to the tune of 5.1%, moving up to 8% in 2010 and then to 8.5% in 2011. Given that in the recent past, India’s actual growth rate has exceeded the Bank’s conservative prediction, things look quite good. Few would have predicted a return to 8% in 2010, looking at the way things had unravelled in the last quarter of 2008. Interestingly, India’s growth rate will, according to the Bank, exceed China’s for the first time in many decades in 2010. In 2011, both the economies will be growing at a neck-and-neck pace. The resilience of India and China, which together account for one-third of global population, has to be good news not just for these two countries but also for the rest of the world.

The really gloomy picture comes from the state of the developed world and the emerging economies of Latin America. The US is expected to contract by 3% in 2009 before posting low but positive rates of growth of 1.8% and 2.5% in 2010 and 2011. The Euro area will perform worse than even the US, contracting by 4.5% in 2009 before rising by 0.5% and 1.9% in 2010 and 2011. Japan is likely to record a dismal -6.8% in 2009 before recovering to 1% and 2% in 2010 and 2011. Interestingly, Latin America seems to have finally caught the crisis bug. The region as a whole is expected to contract by -2.2% in 2009. Out of the region’s biggest economies, Brazil will contract by -1.1%, Mexico by -5.8% and Argentina by -1.5%. These countries will move into the positive terrain in 2010 and 2011 but will grow between 3% and 4% only. In fact, the estimate of growth for all developing countries except China and India for 2009 is -1.6%. This underscores the importance of the economies of India and China in leading a global recovery. In India, growth could get a real boost if the government delivered some concrete action in infrastructure and unleashed a few bold reformist measures in the coming Budget. Even 10% might be gettable.