Updated on 28th August 2015

Growth: Unaffected by Chinese turmoil

The recent unravelling of the Chinese growth meltdown story is unlikely to have any lasting significant impact on Indian economy or its growth trajectory. With only $11-$12 billion export exposure to Chinese market, which is about 0.50% of the GDP, India’s direct exposure will be limited. The risk of some indirect adverse impact on exports though is there due to the larger depreciation in emerging market currencies. But, the largely domestic consumption driven Indian economy (~70% of GDP) is relatively better cushioned from external disturbances than most of its emerging market peers. The latest round of RBI Survey of Professional Forecasters reports a median forecast of 7.6% and 8.2% in GDP in current and next fiscal. The international rating agency Moody’s though is not convinced, and has downgraded its growth forecast to 7% from 7.5% earlier for the current fiscal in the light of ‘drier than average monsoon’, slow industrial recovery and delays in policy reforms. With the China slowdown, where IMF expects growth in 2016 to slip to 6.3%, even at 7% India remains one of the fastest growing economies, and widely acknowledged as with potential to accelerate growth rate further. The recent world economic events can be particularly played to our advantage to attract more investments in industry and infrastructure to accelerate and sustain this high growth. Thus, rather than external events, more impactful on the Indian growth story would be how the Modi Government manages to resuscitates policy reforms from the political morass.