India’s improvement in the World Bank’s Doing Business ranking is the only bright spot in a lackluster economy that desperately needs reassurance of a revival. It’s akin to the Diwali sparkle which lights up India around this time but belies the darkness for the rest of the year. All major global financial institutions have forecasted further decline in India’s economic growth painting a rather gloomy future of the country.

India Slides on Global CompetitivenessThe 2019 edition of The Global Competitiveness Report series, first launched in 1979, featuring the Global Competitiveness Index 4.0 (GCI 4.0) was recently released by the World Economic Forum. The report states that ten years on from the global financial crisis, the world economy remains locked in a cycle of low or flat productivity growth despite the injection of more than $10 trillion by central banks. The latest Global Competitiveness Report paints a gloomy picture, yet it also shows that those countries with a holistic approach to socio-economic challenges, look set to get ahead in the race to the frontier. India ranks 68th, down 10 places in 2019. The drop is only partly the consequence of a relatively small decline in score (61.4, –0.7 points), but also, and more significantly, the progress made by several countries ranked close to India. India ranks beyond 100th on five pillars and features in the top 50 of just four pillars. The slide in India’s rankings is significant considering that it had dropped reached a peak of 39th rank in 2016 and settled at 58 last year, as reported by Asia Law Portal.

Moody’s forecasts further slideMoody’s Investors Service recently slashed its 2019-20 GDP growth forecast for India to 5.8 per cent from 6.2 per cent earlier, saying the economy was experiencing a pronounced slowdown which is partly related to long-lasting factors. Moody’s attributed the deceleration to an investment-led slowdown that has broadened into consumption, driven by financial stress among rural households and weak job creation. ‘The drivers of the deceleration are multiple, mainly domestic and in part long-lasting,’ Moody’s said in a report. It expected the growth to pick up to 6.6 per cent in 2020-21 and to around 7 per cent over the medium term. ‘Although we expect a moderate pick-up in real GDP growth and inflation in the next two years, we have revised down our projections for both. Compared with two years ago, the probability of sustained real GDP growth at or above 8 per cent has significantly diminished,’ it said. The current forecast is lower than the 6.7 per cent mentioned in August 2019, as reported by Asia Law Portal.

IMF Slashes Economic Growth – The International Monetary Fund (IMF) recently released its World Economic Outlook (WEO), October 2019 report titled ‘Global Manufacturing Downturn, Rising Trade Barriers’. The report mentioned that ‘India’s economy is set to grow at 6.1 percent in 2019, picking up to 7 percent in 2020. The downward revision relative to the April 2019 WEO (as reported by Asia Law Portal) of 1.2 percentage points for 2019 and 0.5 percentage point for 2020 reflects a weaker-than-expected outlook for domestic demand. Growth will be supported by the lagged effects of monetary policy easing, a reduction in corporate income tax rates, recent measures to address corporate and environmental regulatory uncertainty, and government programs to support rural consumption.

World Bank Reduces Growth Forecast – World Bank recently released its report South Asia Economic Focus, Fall 2019 : Making (De)centralization Work. The South Asia Economic Focus is a biannual economic update presenting recent economic developments and a near-term economic outlook for South Asia. The report stated ‘In India, after the broad-based deceleration in the first quarters of this fiscal year, growth is projected to fall to 6.0 percent this fiscal year. Growth is then expected to gradually recover to 6.9 percent in fiscal year 2020 and to 7.2 percent in the following year.’ The report highlighted India’s recent economic developments, outlook, risks and challenges.

Fitch Says Growth is at Six-Year LowFitch Ratings issued an analysis stating that it expects India’s economic growth to be 5.5% in 2019-2020, before picking up to 6.2% in 2020-2021 and 6.7% in 2021-2022. Nevertheless, growth is likely to be significantly below its potential over the next year or so. The article mentioned that the Indian economy decelerated for the fifth consecutive quarter in 2Q19, with GDP expanding by a meagre 5% yoy, down from 8% recorded a year earlier. This is the lowest growth outturn since 2013. Weakness has been fairly broad-based, with both domestic spending and external demand losing momentum. This forecast has been continuously lowered by Fitch from 7% in March 2019 to 6.6% in June 2019, as reported by Asia Law Portal).

World Bank Ease of Doing Business – The World Bank released its Doing Business 2020 report, which measures regulations across 190 economies in 12 business regulatory areas to assess the business environment in each economy. India was again among the top 10 economies that improved the most in their ease of doing business score. India achieved the overall rank of 63, improving 14 places from its rank of 77 last year, as reported by Asia Law Portal. This is India’s 5th consecutive year of scaling up of rankings and 3rd consecutive year of being in top improved economies, showing the Government’s commitment and actions. However, this ranking is not a correct reflection of the current economic situation in India as the ease of doing business score was evaluated for performance over the 12 months ending April 30, 2019. India’s profile and detailed performance can be found here: https://www.doingbusiness.org/en/data/exploreeconomies/india#

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra is an India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel with a global research firm in Delhi, India; views expressed are personal; he can be reached at sourish24x7@gmail.com; Twitter: @sourish247

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