Economy & Finance

Are We Slowing?

The global economic growth continues unabated. In spite of predictions of beginning of a slowdown, the slowdown is yet not visible. The world is currently going through one of the longest economic expansion and we are lucky to be experiencing such good times. The economic growth experienced by the world over the last decade is unique. There was a small patch of slowdown for a period of two years; but it was comparatively very mild. The new two growth engines, namely India and China, emerged and grew fast to supply goods and services and even to consume more. The two countries harbour major population of the world and growth in these two countries made the whole world grow faster. Even matured economies like Europe and Japan got philip with the new growth push and now they are growing faster than before. Only in the recent months, the U.S. economy has started showing a slowdown. If it continues, the world may grow slower in the next couple of years. There are no signs of recession; and it is expected that the current economic expansion in the world will continue at least for some more years, though may be at a lesser speed.

The current decade is the decade of Asia. The biggest beneficiaries of the ongoing economic boom are the Asian countries. As the major growth has come from China and India, their neighbours have benefited a lot as well. High oil prices have benefited the countries in Middle East and some oil rich countries in North West Africa and Northern part of South America. Many of these countries are economically underprivileged. The growth, which has occurred in the world in the last few years, is more laudable as it has created more economic balance in the world. May underdeveloped countries could participate in the boom. Though undoubtedly in the current economic order of the world, rich will become richer; at least the poor are not made poorer. That means the rich are not growing necessarily at the cost of poor but everybody is growing in his own way. That is the real economic achievement of the world and that is why this growth phase is long and unique. Now what is really needed is Africa to grow and grow faster. When it starts growing, the world will achieve unique human order.

During the fiscal year 2006-07, India has grown at 9.4%. It is a great achievement in the economic history of India. The per capita income growth achieved by India during the last year was 8.4% and it was one of the highest ever achieved. This growth is not restricted to only urban India; but it has percolated in rural India as well. For obvious reasons, the urban India was the bigger beneficiary as the growth has come on the back of growth in manufacturing and service sectors. Agriculture could not contribute much to the growth numbers. Still, this time rural India has participated in the prosperity and that is a very good indication. Lot is needed to be done in rural India; but we are going in the right direction. The rural India will grow faster only if urban India grows. Political forces should not point their guns at the rural and urban economic void; but allow the each area to grow as per its own ability. If dispute is not created between them for political reasons, for sure they will help each other to grow.

In the current great times, there are only a few causes of concerns; but they cannot be ignored. As of now the U.S. economy is slowing down. Fortunately, this slowdown is not drastic and the growth is positive. Only the speed has come down. Slow U.S. growth can have negative impact on the global growth and specially the growth in Asia, which is the supply hub for goods and services to U.S.

Indian economy, which has been churning out great growth numbers, has recently shown fall in growth rate of automobile sales; and two wheeler sales have gone into negative territory. It is being pronounced that the slowdown in sales is because of high interest rates. Unfortunately, the high interest rates are likely to prevail for quite same time now. It is believed by the economist that slowdown of automobile sale is a great indicator of forthcoming slowdown in an economy. Slower auto sales indicate slower economic growth in near future. If the trend of slow auto sales does not reverse, it is likely that economic growth in India can slowdown. Please do watch out for the sale numbers of auto sector when you are deciding to invest in equity.

Strong Indian rupee can prove detrimental to Indian economic growth in the short run. The profitability of Indian exports will go down. The competitiveness of Indian goods and services may get impacted. If rupee further strengthens as expected by many experts, the effect can be slower economic growth in the country.