India predicted to outshine China as Asia remains a bright spot for global growth

[NG Missile Vessels]

Economic growth in India is expected to outpace that of China this year and next, according to the Organization for Economic Cooperation and Development.

In its latest global economic outlook report, the OECD predicted India, China and Indonesia would top gross domestic product projections for 2023 and 2024. Overall, the organization expects global growth of 2.7% this year.

That would mark the second-lowest annual rate since the global financial crisis, except for the 2020 Covid pandemic year, it said.

"Falling energy prices and headline inflation, easing supply bottlenecks and the reopening of China's economy, coupled with strong employment and relatively resilient household finances, all contribute to a projected recovery," OECD Chief Economist Clare Lombardelli said.

"Nevertheless, the recovery will be weak by past standards," she said, adding that monetary policymakers will "need to navigate a difficult road."

The OECD expects India to grow 6% in 2023; China to grow 5.4%, Indonesia to grow 4.7%.

India's 2022 full-year growth momentum is expected to continue into this year, the group said, after higher-than-expected manufacturing and agricultural output and strong government spending. The OECD added that looser monetary policy in the second half of next year will help household spending momentum return. It also expects India's central bank to turn to mild interest rate cuts starting in the middle of 2024.

The report added that it expects OECD countries' average headline inflation to fall to 6.6% this year, after peaking at 9.4% in 2022. It also predicted the U.K. will experience the highest level of inflation among advanced economies this year. Of countries in focus in the OECD's inflation analysis, only Argentina and Turkey are expected to have a higher headline rate.

In order to combat inflation and address the concerns that lie ahead for the global economy, the OECD advised governments to take the following three measures: maintain restrictive monetary policy; phase out and target fiscal support; and prioritize pro-growth spending and supply-boosting structural reforms.

"Almost all countries have higher budget deficits and debt levels than before the pandemic," the organization said in its report.

"Careful choices are needed to preserve scarce budget resources for future policy priorities and to ensure debt sustainability," it said.

'Fragile' improvement'
Still, the OECD warned the global economic recovery remains fragile as central banks continue to tighten monetary policy, which could lead to stress in financial markets.
"Key concerns are that renewed fragilities could appear in the banking sector, resulting in a broader loss of confidence and a sharp contraction of credit, and a heightening of risks from liquidity mismatch and leverage in non-bank financial institutions," it said.

While noting that banks may collectively be more resilient than they were during the recent global financial crisis, the OECD said, "market confidence remains fragile, as shown by the speed at which banking sector pressures spread across countries following bank failures in the United States in March."

It also pointed to elevated debt levels in advanced economies, following the Covid pandemic and Russia's war in Ukraine.

"Most countries are grappling with higher budget deficits and higher public debt. The burden of debt servicing is increasing, and spending pressures related to ageing and the climate transition are building," the OECD's Lombardelli wrote.

Last month, World Bank president David Malpass raised similar concerns, adding that the debt-to-GDP ratios for advanced economies are "higher than ever before."

Asia remains bright
While the global economy could slow down further, Asia is expected to remain a bright spot as regional inflation is expected to remain "relatively mild," OECD says. It added China's reopening is expected to boost demand for the wider region.

Elsewhere, the OECD forecast GDP growth of 1.3% for Japan, boosted by fiscal policy support, as underlying inflation continues to move up toward 2%.

Nomura economists in a Monday note wrote that global financial conditions suggest it's "Asia's time to shine."

"The stage is set for Asia's medium-term outperformance," analysts led by Rob Subbaraman wrote.

"The prospect of subdued global growth and the near-end of policy rate hikes are likely to spur investors to look for new opportunities, while placing a premium on healthy economic fundamentals – we believe Asia fits the bill," they wrote.

India predicted to outshine China as Asia remains a bright spot for global growth

In its latest global economic outlook report, the OECD predicted India, China and Indonesia would top gross domestic product projections for 2023 and 2024.

www.google.com

 

[truthseeker2010]

So India's 7.0% is more than China's 5.1% growth. OK!

 

[NG Missile Vessels]

Like China, India too can sustain high growth for 10-15 years: CEA

India can grow at a strong clip for a lengthy period without overheating, just like China did between 1979 and 2008, Chief Economic Adviser V Anantha Nageswaran said Friday.

He said India has “the potential to grow steadily between 6.5-7 per cent” between now and 2030 based on the reforms undertaken so far, without even assuming any further reforms, adding that additional reforms can then help push up growth even beyond to 7.5-8 per cent.

“In the last 30 years, whenever the Indian economy grew very strongly for 3-4 years, it used to run into problems: inflation will pick up, imports will go up, the currency will become very expensive, and then we have to take some drastic action. But this time, because of the sound economic policies we have followed, because of the infrastructure we have built in the last eight years, and because of digital transformation of the economy, it is possible now for the Indian economy to grow for a longer period — not just three years or five years, but seven or 10 or 15 years like China did between 1979 and 2008.

“India can grow for a longer period without running into overheating problems because if you run machinery for a long period it tends to get overheated, that is the law of physics. But the speed with which we get overheated was a little too quick in the past but this time because of all the various good things we did in the last 8-9 years, we feel that the machine can run for 8-10 years without getting overheated. The economic machine. That is the hope we have at the moment for the economy,” he said.

Speaking at an industry interaction organised by Confederation of Indian Industry (CII) in Lucknow, the CEA also said that actual investments by the private sector are beginning to happen, which would result in job growth across rural and urban India in the coming years.

“That is the momentum in the economy. That is what we are witnessing, that even 7.2 percent will turn out to be an underestimate and not an overestimate of growth last year,” he said.

With regard to Fiscal Responsibility and Budget Management (FRBM), Nageswaran said the overall goal of ensuring fiscal sustainability has not gone away even though the mechanism for doing so might vary depending on the compulsions of the time — and so, a 4.5 per cent gross fiscal deficit ratio is in place.

To achieve the target, Nageswaran said: “All we need to achieve is 3-5 years of 10 per cent steady nominal GDP growth and all these fiscal parameters will automatically improve because our growth rate is higher than the cost of borrowing.”

India’s gross debt was at 81 per cent of GDP in 2005 which increased to 84 per cent now, he said, adding, only two other countries have done better than India — Indonesia and Germany — with a 2 per cent slippage in the overall debt to GDP ratio.

“Many other countries in the G20 and beyond have seen a slippage in their debt ratio by orders of magnitude of 40 to 80 percentage points… We at least held steady and we are a country which has a potential to grow in nominal terms between 10 and 11 per cent. All that being said, I will also concede that we are at BBB minus. Even a country like the Philippines, which is much smaller than us, has a BBB plus credit rating. And that means if you go from BBB minus to BBB plus your government’s cost of borrowing will come down by 100 basis points and that is a fiscal stimulus,” he said.

So, good fiscal health would translate into a good fiscal stimulus for citizens because interest rates will come down, he said. “So we are aware of that and we are working towards it. Asset monetization and natural economic growth should help. There is no second opinion on the importance of keeping at it and achieving these numbers and getting to a better credit rating because it’s not just a question of prestige, it’s a question of actually putting more money in the hands of people through lower interest rates,” he said.

Like China, India too can sustain high growth for 10-15 years: CEA

Speaking at an industry interaction organised by Confederation of Indian Industry (CII) in Lucknow, the CEA also said that actual investments by the private sector are beginning to happen, which would result in job growth across rural and urban India in the coming years.

www.google.com

 

[Laozi]

So India's 7.0% is more than China's 5.1% growth. OK!

China has a six times bigger economy than India therefore there is no problem for China for now its growth is much bigger.

But India's growth is moving from 6% to 7% while Chinese average is coming down. That should worry China.

 

[NG Missile Vessels]

China has a six times bigger economy than India

GDP on last fiscal year: $3.5 trillion
GDP of China: $17.7 trillion
China's economy is 5X times bigger than not 6 times and high growth rate in the next decade will make sure that it comes down further

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