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Last updated: 12 Jan, 2016  

globe-hand-thmb.jpg Time to guard against global woes

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Bikky Khosla | 12 Jan, 2016
There is a bumpy road ahead for the world economy in 2016 -- the persistent China panic contains this unnerving message. The second largest economy in the world is facing a slowdown, which in turn may drag down the emerging market economies. It is also feared that a slowing China could affect the rich-world markets and even derail the US economic recovery. The IMF has cut the global growth forecast for 2016 to 2.9 percent, pointing out downside risks, including slower emerging market growth, financial stress around the US tightening cycle, weak commodities prices, and heightened geopolitical tensions. Today, India is, of course, in a better place than other emerging nations. Nevertheless, its resilience may be tested this year.

What could be the impact of the China slowdown on us? The Commerce Minister last week said that the yuan devaluation is a "worrying" development, which will make Indian exports expensive and widen our trade deficit with China. These concerns are worth considering. Our export sector is already going through a rough phase and a slowing China, which accounts for nearly one-tenth of our merchandise trade, may hit our exports further. So, the Centre should constantly monitor this situation so that cushion measures, if required, can be taken with no delay. At the same time, I think the reduced possibilities for the Chinese companies in their own market could be taken as an opportunity to woo them invest in our manufacturing and infrastructure sectors.

As the global uncertainties continue, I think it is the right time to take steps to boost the domestic economy. Some media reports say that the government is likely to step up public spending in rural sectors like irrigation and rural roads. It is pretty good thinking, but at the same time I think special attention should be given to the agriculture sector, which has been hit by two consecutive droughts. Revival of this sector holds the key to rural demand revival. Similarly, more needs to be done to secure the health of the ailing banking sector. Infrastructure, including the highways and roads sector, which is facing slump in private investment, also requires special attention. In the light of this, the upcoming budget will be crucial for the government.

Meanwhile, it is widely anticipated that the third quarter results of corporate India will remain weak. According to an estimate, Sensex earnings for the period are set to drop 5 percent. It is pointed out that the damage to the top line will be the result of collapse in commodity prices. Low consumption spends and sluggish investment, especially in the private sector are also playing spoilsport. Besides, demand for both consumer goods and capital goods has remained very weak. Another latest report adds that consumer confidence plunged to a historic low in December. These data sets clearly show that all is not well in the economy, and the time to act is now.

I invite your opinions.
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Time to guard against global woes
Robert Dubsky | Fri Jan 15 01:29:55 2016
GDP as a measure must be used with caution. China may well be the 2nd largest economy in total, but GDP per capital indicates that it is still relatively poor. Consequently for the RMB to link to the US$ can only be seen as appeasement to the US. A more sensible basis is a market rate or at least a basket of relative currencies. India needs to focus on fixing the impediments at home before seeking excuses that blame other nations. As the worlds biggest grower of sugar and cotton, it is shameful that there are acute water shortages dues to poor water resource management. These shortages result in a vast loss of production. Can it be true that the last dams were built under British rule? If so, does the present water crisis not give leaders a clue about where investment is critical?

Global woes and Indian economy
Christopher Wilson Fernandes | Wed Jan 13 08:45:39 2016
Don't blame global woes for the issues we are facing. Previous and current governments have been and are ineffective. They neither do or allow others to do constructive work. We need reforms at every level. We know that all levels of govt are corrupt - this is our prime problem. Solutions are available but the people in power have no intention of implementing them. How can we ask the police to police themselves. Chaos followed by anarchy and revolution is the only way forward for our country. There is no other way.

  Re: Global woes and Indian economy
Harish P Shenoy | Thu Jan 21 02:49:00 2016
I agree with this comments . Unless the corruption problem solved we(India )cant move ahead , being rich in all kind of resources , we are just wasting them all . India could have been the super power like USA if our Politics is clean and caring for the country than Individual interest .

Improving Indian economy
Anil Chandhok | Wed Jan 13 07:32:40 2016
As you have rightly pointed out, the two major sectors of opportunity are Manufacturing & Agriculture. To promote manufacture, the labour laws need to be modernised, so that these laws act as an encouragement to employ and not as a deterrent. Care should be taken that the emphasis should be on job creation and not on protection of benefits to unionised sector. As regards agriculture, although India is amongst the top 3 in very many commodities, the state of food processing is pathetic. One of the reasons why this hasn't taken off is that the food standards in the country are ancient and need to be urgently modernised. This will attract entrepreneurs to food processing.With the correct regulatory support, food processing sector can rival the IT sector and revolutionise the exports.

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