India’s revival risks: US rate hike, exports slide, Chinese slump
Drought-hit farm incomes, deceleration in exports, interest rate rise in the US and a further slowdown in the US could upset India’s growth recovery, experts have cautioned even though domestic industry has shown strong revival signs.
India’s “real” or inflationadjusted gross domestic product (GDP) grew by 7.4% in the second quarter, driven primarily by domestic demand and falling lending and inflation rates over the last few months. A further fall in exports if global growth remains weak, a hike interest rates by the US Fed Reserve and a sharper-than-expected slowdown in China remain the main risks to growth, Crisil said in a research report. Besides, India’s services sector still appears some distance away from regaining its status as the economy’s growth engine. The services sector (including construction) grew 8% during July-September, still two percentage points lower than the average growth in 2004-2009.
All the major components of the services economy — hotels, communication, financing, construction and public spending — have recorded growth rates below the decadal average during the last two years.
The domestic industrial sector, however, has shown signs of revival. The manufacturing sector, which accounts for 75% of India’s total industrial output, grew at 9.3% during JulySeptember, from 7.2% in the previous quarter and 7.9% in the year-ago period.