We’ve been writing a lot about India lately, because the rupee is in free fall, as the country faces a deteriorating balance of payments situation, while the government produces policies that are likely to exacerbate inflation and the deficit.
One chart really stands out though, and that’s the rate of growth, which has collapsed.
Here’s a 20-year look a GDP growth (via TradingEconomics.com) which shows how slow things are getting.
In just a few years, it’s gone from nearly 10% growth to close to the lowest level in 20 years.
And it’s expected to get worse:
India and Indonesia have remained in the eye of the EM storm over the last week. India’s situation is now approaching a full-blown crisis, with timid policy action continuing to compound a fraught and delicate situation. With more pro-cyclical tightening looking inevitable and the economy already slowing hard, we have cut back our estimates for Indian GDP growth to 3.7% in FY2014. This is not only easily the lowest in the market but would be the slowest growth in 20 years. While a decision to allow state-owned oil companies to temporarily borrow USD from RBI brought temporary relief to the INR after its more than 4% slump on the 28th, risks to the currency remained skewed to the downside. Our primary fear is that, with the scale of the likely slowdown this year not fully priced in, long-term equity capital could exit, prompting another leg down in the currency.