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Growth rebound in sight for India?

Issac John /Dubai
Filed on January 7, 2020

(AFP)

Despite the current dismal growth statistics, India's dream-goal of becoming a $5 trillion economy appears to be a possibility, albeit not within the targeted time frame of 2025, if the economy can make a rebound next year as predicted by analysts.

According to US-based analysts, fears of an economic crisis in India are likely to decrease and the country may recover from decelerating growth in 2020.

If predictions by the private equity firm Blackstone are to be believed, this year the Modi government is likely to continue business-friendly growth reforms, and the Indian economy is likely to grow at six per cent, while the markets could rise by up to 20 per cent.

India's GDP - not long ago the fastest growing in the world - grew at 4.5 per cent in the second quarter of the 2019-20 fiscal year as compared to the same quarter of the previous year, making it the six successive quarter of shrinkage. If the trend continues for one more quarter, it would make for the longest spell in over two decades since quarterly GDP data is available for India.

India's recovery is among the list of 'Ten Surprises for 2020" given by Blackstone Vice Chairman Byron Wien along with Chief Investment Strategist Joe Zidle this year. This is the 35th year that Wien has given his views on economic, financial market and political surprises for the coming year.

Given the grim economic data of the past few quarters and the doubts and concerns voiced by ratings agencies and economists on the medium-term outlook, India's goal of becoming a $5 trillion economy by 2025 appeared an unrealistic target.

International Monetary Fund's chief economist Gita Gopinath is among the most prominent economists to sound the alarm, arguing that Asia's third largest economy would have to grow at 10.5 per cent in nominal terms as against six per cent in the last six years, and 8-9 per cent in real terms in order to achieve the target.

The IMF in its October 2019 forecast had projected 6.1 per cent growth for India in 2019 and the same to go up to 7 per cent in 2020.

Gopinath, however, has warned that the fiscal situation in India is "challenging" and the country will certainly breach the 3.4 per cent deficit target.

Former RBI governor Raghuram Rajan also has said repeated government "allusions to a $5 trillion economy by 2024, which would necessitate steady real growth of at least 8-9 per cent per year starting now, seem increasingly unrealistic."

"Declining consumption and investment and falling tax revenue, have combined with other factors to put the brakes on one of the fastest-growing economies in the world," the IMF said in its recent annual review on India.

The IMF said India, currently in the midst of a significant economic slowdown, must take steps quickly to reverse the downturn of an economy that has been one of the engines of global growth.

- issacjohn@khaleejtimes.com

author

Issac John

Editorial Director of Khaleej Times, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Khaleej Times. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.


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