India not as decoupled as it seems, still relatively on a sticky path due to inflationary trends: economists

China’s absence as a shock absorber for global economy is conspicuous this time, says QuantEco’s Rao; adds private capital expenditure mostly missing due to global uncertainty

Representational file image. | Photo Credit: V. V. Krishnan

Although it appeared that India was decoupled in the short term from the global economic recession, it was still on a relatively sticky path as far as inflationary trends were concerned unless inflation dropped to 4% levels, according to a panel of economists.

Observing that India’s growth had outpaced global growth mostly because its base was small, Shubhada M. Rao, Founder, QuantEco Research said the country’s ‘macros were still far better compared with the rest of the world’. “But our economy is globally synchronised and therefore we can not be fully insulated,’‘ added Ms. Rao, who was one of the economists who spoke on India’s growth outlook amidst the looming global slowdown, at a webinar on Friday.

She further noted that China was conspicuous by its absence as a shock absorber this time. “Unlike in the past, China has been a big absentee in supporting global recovery this time. So, we can’t see China absorbing recessionary shocks.”

Commenting on economic stimulus through investments, Ms. Rao said private capex was mostly missing in the country as there still remained a fair degree of uncertainty and volatility in the global markets.

“A lopsided demand recovery is evident in our economy, and that is slowing down actual capex executions, especially in the private sector,’‘ she clarified.

According to Dharmakirti Joshi, chief economist, Crisil, the services sector, including travel, tourism and hospitality was one of the key drivers while agriculture was playing the second fiddle.

“Consumption momentum is good in certain segments. Despite abnormal monsoon, our agriculture output has grown,” he added.

Also, banks and corporates had been able to maintain a healthy balance sheet and therefore would be able to absorb any shocks, Mr. Joshi opined.

Sachchidanand Shukla, chief economist, Mahindra & Mahindra, observed that some of the largest States in the country were witnessing a gradual deceleration in consumption, due to lower purchasing power.

“India should have systems that can plan debts better. Our rural economy will improve if erraticity in government spending tapers off,’‘ Mr. Shukla remarked.