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Economic Macro-Forecasts for India (2014 – 2015)
Currently, India has managed to quell the implications that have arisen from the volatility of the global market. This is particularly illustrated by the stability of the exchange rate, bond markets, as well as equity that is presently not exuding divergence. The market’s relative stability underlines the improving economic stance by India on structural reforms, decreased commodity prices, and the recurring reduction of its monetary policy (Buiter et al. 27). However, within the past year, India’s evolution has not occurred without its fair share of challenges. This is largely attributed to the disproportionate nature of the country’s economic recovery. Challenges such as the fall of the Purchasing Managers Index (PMI) to 51.3 at the end of the second quarter and lackluster nature of the export growth create a slow recovery situation for India. On the other hand, a 33 percent Year over Year (YOY) return attributed to the expansion of novel project announcements, a rise in infrastructure segment growth in May by 4 percent and an increase in the collection of excise duty by 95 percent illustrate the country’s signs of economic recovery (Buiter et al. 27).
The forecasts seem to be reliable in this case. For instance, there is evidence of a cyclical recovery prior to the forecasts released in June 2014. Accordingly, the forecasts illustrated that the country’s economy will most likely be susceptible to improved manufacturing activities, increasing production of intermediate commodities, and better exports (Keller, Chow, Fernandez, Grisanti, and Salomon 60). However, data on the manufacturing activity was not particularly reliable based on the decreasing rates of PMI that the economy faced during this year despite last year’s positive PMI indications (Keller, Chow, Fernandez, Grisanti, and Salomon 60). A revival of the infrastructure growth measures as forecasted in the previous year indicates the extent to which the forecasts exude reliability. For the present year, India’s economy showed a slight rise in the growth of the core infrastructure sector by 4 percent. Further insistence on the rise in infrastructure growth within the previous year’s forecasts illustrated a possible rise in the same figures for the end of Q2 2015.
The perceptions regarding the influential nature of weather conditions in India indicate the extent to which the respective forecasts are reliable in terms of understanding the factors and aspects that show the country’s improvement, its fall, and its opportunities. Forecasts from 2014 showed that the weather conditions would pose a challenging implication on the country’s agricultural sector if they take place. Similarly, forecasts for Q3 2015 illustrated the effects of weather conditions on India’s economy. This was illustrated by the effects of the Monsoon rains on activities aimed at augmenting agricultural activities and produce. Additionally, the risks associated with the heavy Monsoon rains affect the state’s agricultural sector position following a 16 percent excess in June’s rainfall and a sum 4 percent decrease in July.
In addition, a 95 percent increase in the collection of excise duty denoted a possible increase in manufacturing activity as asserted within the previous year’s forecasted projections. Similarly, projections for the current year denote a cyclical recovery for India’s economy (Keller et al. 51). Aside from the separate data on recovery, an improved stance in growth in relation to government expenditure forecasted a possible increase in government activities, specifically the growth of the main infrastructure sector. The surge of capital expenditure especially within the first quarter of the main year estimated that India’s economic recovery was bound for a slow and steady increase. Other processes such as the construction and development of roads were seen as possible factors that are capable of illustrating the occurrence of India’s improving economy in FY 2015.
The implications of the recession within the global environment affected India and the position of the BRIC countries globally. Accordingly, a period characterized by a stint in the economic growth for most states translated into poor relations between BRIC countries as well as their respective partners. For instance, Russia was among the countries affected most considerably by the recession. Coupled with its violent involvement in geopolitical situations, specifically with Ukraine, the country affected its relations with major trading partners such as the United States, which would later impose sanctions on the respective economy.
The slow recovery of the BRIC economies has affected India’s economy to experience a fast and steady recovery. Even though China’s GDP increased between 10 and 15 percent for the previous year, other states (particularly Brazil and Russia) experienced economic slumps that projected either a slow rise in growth or a block in terms of increased GDP. For instance, Russia indicated a block on its rise in GDP due to the sanctions imposed on it by countries such as the United States. Because of this, exports lined up for the country decreased considerably. Similarly, the country’s challenging economic impact due to the effects of Germany’s near encounter with the recession has dealt a blow on its economic recovery process. On the other hand, India’s GDP increased by 7.3 percent within the FY 2014-2015 and is expected to increase by 7.8 percent during FY 2015-2016. Additionally, it is anticipated that public expenditure will increase whereas private consumption will gradually improve. With the inclusion of the new government under N. Modi, India expects to achieve a fiscal deficit mark of 3.9 percent within the GDP in the next period (Keller, Chow, Fernandez, Grisanti, and Salomon 61).
Works Cited
Buiter, William, Guillermo Mondino, Michael Saunders, William Lee, Kiichi Murashima, David Lubim, and Johanna Chua. Global Economic Outlook and Strategy – July 2015. CitiGroup Global Markets, 2015. Print.
Keller, Christian, Aroop Chatterjee, David Fernandez, Alejandro Grisanti, Andreas Kolbe, and Mitul Kotecha. The Emerging Markets Quarterly: Hoping for a Growth, fearing the Fed. London: Barclays PLC, 2015. Print.
Keller, Christian, Koon Chow, David Fernandez, Alejandro Grisanti, and Marcelo Salomon. The Emerging Markets Quarterly: Preparing for a More Challenging Second Half. London: Barclays PLC, 2014. Print.