July 5, in Bengaluru, India, a man walked past a clothing store. Xinhua News Agency reported that
inflation rate exceeded the upper limit
unemployment rate remained high
real wages were at a record low
energy and commodities
price rose
domestic consumption may not be able to continue to provide impetus for economic growth
a data
India's nominal GDP at the end of the first quarter of 2022 was US$854.7 billion, while the UK's data for the same period was US$816 billion.
A forecast
IMF predicts that India's GDP will still surpass the United Kingdom in 2022, second only to the United States, China, Japan and Germany.
One view
International financial institutions maintain a cautious view, believing that although India's current economic growth rate is strong, its economic growth momentum may face insufficient.
According to Bloomberg's comprehensive International Monetary Fund (IMF) data and historical exchange rate calculations on Bloomberg terminals, India has surpassed the United Kingdom to become the fifth largest economy in the world. The IMF expects India's economy to be about 20% larger than the UK in 2027.
American human resources consulting firm Safeguard Global believes that India's large-scale economic growth is largely due to globalization. Since 1990, the country's GDP has grown at an exponential rate and is expected to reach a staggering $4.5 trillion by 2026. However, international financial institutions such as Goldman Sachs and Morgan Stanley have maintained a cautious view on India's economic prospects, believing that although India's current economic growth rate is strong, it still faces multiple pressures and the momentum of economic growth may be insufficient.
The UK faces
40 fastest inflation in the past
IMF data shows that after correction, India's nominal GDP at the end of the first quarter of 2022 was US$854.7 billion, while the UK's data for the same period was US$816 billion. In addition, according to preliminary statistics recently released by the UK's National Office for Statistics, the UK's GDP shrank by 0.1% month-on-month in the second quarter of this year.
The agency expects that India's GDP will still surpass the United Kingdom in 2022, second only to the United States, China, Japan and Germany. According to analysis, India's economic scale will be about 20% larger than that of the UK in 2027. You should know that 10 years ago, India ranked only 11th in the world in GDP, while the United Kingdom ranked fifth.
The decline in Britain's GDP is also an unpopular result for the new British Prime Minister to be announced. Bloomberg reported that British Conservative Party members will elect a new prime minister on Monday (September 5) London time, and British Foreign Secretary Leeds Tras is expected to eventually defeat former Chancellor Sunak to win the election.
And for the new British Prime Minister, the challenges before him are very specific. The UK is currently facing the fastest inflation in 40 years and there is no sign of relief. The Bank of England believes that inflation may continue until 2024. At the same time, the slowdown in economic growth and rising natural gas prices have led to the continued deterioration of the economic outlook of the UK and Europe. It is expected that the UK economy will fall into recession starting from the fourth quarter of this year.
Meanwhile, the pound has not performed as well as the US dollar against the Indian rupee, which has fallen nearly 9% this year.
In the context of globalization,
India's large-scale economic growth
In contrast, Indian stock market also achieved a strong rebound in the third quarter, and India's weight in the MSCI emerging market index has risen to second place, second only to China.
American human resources consulting firm Safeguard Global believes that India's massive economic growth is largely due to globalization, the transformational changes that began in 1990. Since then, the country's GDP has grown at an exponential rate, leaping from $270 billion in 1991 to $2.87 trillion in 2019 and is expected to reach a staggering $4.5 trillion by 2026.
In its report, the agency pointed out that "the reduction of export subsidies and import barriers have promoted free trade, and the untapped Indian market has attracted the attention of the international community as strongly as a magnet. The changes brought about by these reforms are the most obvious in the industrial, financial and agricultural sectors.”
News Observation
rush onto easy is difficult to sit firmly
Data shows that India's real GDP in the first quarter of fiscal year 2022-2023 (corresponding to the natural year April-June 2022) increased by 13.5% year-on-year, the fastest growth rate in a year, and is still the fastest economic growth in the world, but the growth rate was lower than the central bank's expectations of 16.2% and the market expectations of 15.2%.
Some point of view pointed out that although India surpassed the UK to become the fifth largest economy in the world, due to the huge population gap between the two countries (1.4 billion in India and 68 million in the UK), there is still a considerable gap in per capita GDP between the two countries (US$2,500 in India and US$47,000 in the UK).
India After the real GDP data of the first quarter was released, Reuters also poured cold water on India in the report. It quoted analysis from several international economists that India's status as the "fastest global GDP growth economy" may be "a flash in the pan" because the country is struggling to cope with the high unemployment and inflation rate, and domestic consumption cannot continue to provide impetus for economic growth.
Goldman Sachs also lowered its expectations for India's full-year growth, lowering India's GDP growth forecast in 2022 from 7.6% to 7%, and at the same time lowering its current fiscal year's GDP growth forecast by 20 basis points from 7.2%. Morgan Stanley also said that India's growth forecast for this fiscal year is at risk of a 40 basis point cut.
Indian economist Kunal of Societe Generale Kundu believes that due to the high unemployment rate and the real wages are at a record low level, domestic consumption in India may not be enough to further drive economic growth. He said that India's economic growth rate is not enough to accommodate about 12 million people entering the labor market every year.
reporter noticed that since the beginning of this year, India's inflation rate has been above the central bank's tolerance limit of 6%, and the central bank also vowed to take more measures to curb inflation. On August 5, Mumbai time, the central bank of India raised interest rates by 50 basis points to 5.4%, which is the third rate hike in the current fiscal year (April 2022 to March 2023).
After experiencing the exceeding expectations of interest rates in May and June, the central bank of India has raised interest rates by 140 basis points in the past three months. Market analysis believes that 6 monetary policy committees Members agreed to raise interest rates this time, reflecting the Bank of India's determination to remove easing. Continuous high inflation may undermine market inflation expectations and damage India's medium-term economic growth. The Bank of India will remain vigilant and maintain the stability of the rupee. The Indian rupee exchange rate has fallen by 7% this year. With inflation continuing to rise, foreign funds flowing out of Indian stock markets reached nearly US$30 billion, a record high; amid rising oil and commodity prices, people are worried about the deterioration of the country's current account deficit, which has hit the Indian rupee hard.
In addition to tightening monetary policy, India is also facing pressure on rising energy and commodity prices, which may further put pressure on consumer demand and corporate investment. Comprehensive Daily Economic News, The Paper
(CCTV, Chengdu Business Daily)
