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Beyond The Usual: India’s Macroeconomic

Beyond The Usual: India’s Macroeconomic

By Prakash Jain

Indian economy certainly has problems, but compared to the rest of the world, I surely would give it a deep dive thought

Particularly since a couple of months and at large, over the past years, we can be quite convinced that the brokers, economists, intelligentsia, fund managers, etc., have given up on being update on the GLOBAL macroeconomic happenings.

All the parties mentioned above have criticized the United Progressive Alliance government to the level X for having tumbled-down the economy, causing a growth slowdown and therefore deserving to be thrown away in favour of Shri Narendra Modi. The debate, whether Modi has any substantial wherewithal to effect a “turnaround” for the country can never end. To carry on the second question arises, whether the National Democratic Alliance has any latent finance minister who may in the least appear to understand the business. Shri Yashwant Sinha would be an obvious answer, but before we conclude let’s keep in mind the unceremonious dump in 2002 because of popular demand within the BJP, so bad was his performance as the finance minister of the country.

That is not the point of this piece. Neither is the fact, that even the lowly current government with its multiple ministers delivered ~6 per cent compounded growth, with low debt, much better than what the BJP managed. The point is to inform commentators of what has been happening in the world around us in recent years (since 2008).


  • Once the blue-eyed boy of all global fund managers, the country has been chaotic
  • Massive current account deficit at 7 per cent of GDP
  • Plunging currency
  • Crashing growth (2 per cent)
  • Decimated stock market


  • 2 per cent or lower growth, down from eight per cent in 2007
  • Massive dependence on oil and gas; Gazprom contributes ~70 per cent of countries revenues


  • 3 per cent current account deficit
  • Massive growth collapse since 2008, from 6 per cent to ~2 per cent
  • Plunging currency and stock markets
  • All this despite being commodity rich


  • Acute current account deficit problem
  • Inflation has been pesky, leading to tightening by the central bank
  • Corruption is a massive problem,
  • Suffers all these problems despite being commodity rich


  • Slower growth at just about 1 per cent, down from 9 per cent
  • Massive debt-to-GDP at 110 per cent
  • Unsustainably high consumer debt levels
  • Sharply rising social unrest


  • Massive political unrest
  • Sharp slowdown: economy contracted 0.3 per cent in the second quarter of calendar 2013
  • Falling currency
  • Major problems financing its rice-buying programme

South Korea:

  • Growth rates halved from 2007 levels, to ~2 per cent
  • Inflexible labour markets
  • Rapidly ageing population, excessive reliance on exports, are major growth barriers

The US and Euro zone:

  • Stalled in slow growth rut, despite stimulus
  • Outlook still fragile
  • What keeps everybody awake at night is what is the US’ real growth and unemployment at zero stimulus and reasonable interest rates.

Last and kept on purpose, China for the end:

  • 2012: When I peeled off layers to show that far from being a low debt to GDP as was commonly believed, the Chinese economy was leveraged with debt to GDP at ~150 per cent, if not more then and for certain that number is well over 200 per cent now.
  • China needed 1.4 of debt to generate 1 of GDP growth and now the scenario is 2.
  • Since 2008, China has added ~ $15 trillion to its bank credit
  • Railway ministry: Debt of $500 billion
  • Corporate debt: ~150 per cent of GDP
  • Economies inflexible exchange rates and increasing labour costs are making China uncompetitive in trade too.
  • Money supply growth is 2 times its GDP
  • Non-performing loans could be 20 per cent of GDP
  • Impregnable mark of 8.5 per cent GDP growth has now shifted down to 7 per cent.

By now, certainly the thought of India and its economic growth would have changed. 10 years of unbelievable growth, reduction in debt-to-GDP to ~65 per cent from bankruptcy level of ~85 per cent and all of this with 7 per cent wholesale price inflation, moderate current account deficit and moderate external indebtedness. Hello, has India slowed?

Well, compared to the impulsive drop countries have seen since 2008-09, a 5 per cent growth with almost around zero debt risk is not only excellent but also top-drawer performance.

It is immature to expect India to be in nirvana, growing at 8 per cent, with reduced current account deficits and reduced inflation, when it is world’s 3rd largest economy (in purchasing power parity terms), and, hence can’t escape safe from the ravages of global on-going crisis.  To surprise, there is a united cry for exceptionalism and that India should adhere to no global drifts. This leads to the under-analysed view at large that we need Modi’s remedy, because he can turn headwinds into tailwinds. It is humorous how parties (as mentioned above) opportunely forget terms like “relative performance” and “risk-adjusted growth” when it comes to scrutinizing and concluding India.

The inescapable fact is that what India has achieved, during this period is an outstanding performance. No doubt, we have glitches, but compared to what the rest of the economies have, we would want to take ours any day.

There is no absolute measure of greatness.

It is always relative.

Prakarsh Jain is a graduate from Jai Hind College, Mumbai and a Chartered Accountant. In full-strength to continue his passion for studying, he moved on to take up Masters of Global Business in Investment Banking & Wealth Management from S P Jain School of Global Management.In addition, he also acted as a delegate at the World Islamic Banking Conference: Asia Summit. Email ID: [email protected]

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