Volatile emerging markets top risk for 2013, India at 9th: Eurasia Group

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India's difficult policy-making environment will be the ninth biggest risk for global economy in 2013. (Reuters) India's difficult policy-making environment will be the ninth biggest risk for global economy in 2013. (Reuters)
SummaryIndia's difficult policy-making environment will be the ninth biggest risk for global economy in 2013.

India's difficult policy-making environment will be the ninth biggest risk for global economy in 2013, while increased volatility across emerging markets will be the top-most risk for the year, a new study has said.

As per the study conducted by Eurasia Group, the world's leading global political risk research and consulting firm, the second biggest risk in 2013 for the global economy could be China's fight against flow of information, including those from the cyberspace.

The others on a list of ten biggest risks, as compiled by Eurasia report, include 'Arab Summer' at third place, followed by issues related to Washington Politics (4th), JIBs – Japan, Israel and Britain (5th), Europe (6th), East Asian geopolitics (7th), Iran (8th), India (9th) and South Africa (10th).

About India, the report said that the country "in 2013 will be one of the prime examples of the intrusion of political factors into what had been until recently seen as a long-term economic success story.

It said that India's emergence as the world's next 'growth uber alles' (the biggest growth engine) could not be so fast.

"In 2013, the ability of the government to implement robust economic policies will decline even further, perpetuating India's 'stalling or falling' outlook.

"As general elections draw closer, political opportunism and obstructionism will increase. Any support for reform from the fickle regional parties that hold the balance of power in Parliament will likely wane," it added.

Fearing that "poor policy-making will extend to fiscal policy", Eurasia group said that any meaningful fiscal consolidation would be unlikely this year in that case.

"The best of circumstances, the political context for economic reform might improve following the elections (scheduled for 2014).

"But, at this point, the more likely outcome is that India's policy-making environment becomes even more difficult as the poll is expected to return a more fractious and divided Parliament, generating a weak ruling coalition without the political support for a strong reformist push," it added.

The report said that political risk has come to the fore across the world while dealing with the worst slowdown since the great depression, and "geoeconomics now sits alongside geopolitics in matters of war, peace, and prosperity."

"Whether staring over the fiscal cliff, battling the eurozone crisis, trying to profit from a rising China, or taking cover from the Middle East; around the world, politics has come to dominate market outcomes," it added.

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