By Rashmi Saluja
Since beginning of 2019 world has been dealing with different challenges and it still continues to face them. We started with global slowdown, followed by COVID and now high inflation is the latest enemy to tackle. History has shown that no matter how big the problem has been, we the people have been the winner at the end of it. However, impact is different on all. Today, when world has more or less got on its feet and things are moving back to normal, the impact of COVID and high inflation has been different on many countries.
Around 81-82% of world GDP is from 3 continents viz. Asia, North America and Europe. The largest continent as per GDP is Asia where China is the leader followed by Japan and India. North America is all about US and when it comes to Europe, its Germany, UK and France that are the major contributors. These 7 nations determine global GDP growth. Among these names, we believe India is much better positioned at this point in time not just for its fundamentals being in place but also due to others going through various challenges.
North America: US October CPI showed a down tick and came at 7.7% which people are rejoicing as can be read from stock markets. However Fed is determined to continue interest rate hikes, may be the pace may reduce. If you look at the actual CPI reading since 2019 till date and move out of this month on month and year on year statistics and see things in totality the inflation reading has moved from 251 to 298 which is around 20% increase. Now if you look at absolute GDP numbers in same period it has moved from $21.3Tn to $25.0Tn. Data indicates real GDP growth rate is negative in US. Also if FED over shoots, which we believe it is, then the real threat of recession may surface.
Europe: This region apart from economic slowdown and COVID also got marred by Russia-Ukraine war and if that was not enough there was political instability in UK due to some of the policies which were rejected by its people at large. More than half of the nations in Euro zone recorded double digit inflation growth. This has forced this region to focus completely on inflation management.
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Asia: China the biggest of all here is far away from the growth rate which it enjoyed for the prolong period of time in pre-covid era. Crisis in housing market along with country still dealing with covid has forced economy to be on the back foot. Japan saw its peak GDP in year 2012 so let’s leave it aside. India too has inflation issue but there is real GDP growth too.
India: We believe by now most of us have started believing that amidst global uncertainties, India is in its own purple patch where high growth environment exists at not so very high interest rate. Apart from periodic food inflation, Indian economy is feeding on domestic consumption story which may continue for prolong period of time. Sectors like consumers, auto, hospitality, real estate are bearing the fruits now of pent up demand and high saving period during pandemic and thereafter.
Though India is running its own race it can’t do it in isolation and decoupling period have reduced as technology has connected us all irrespective of distances. Risk to Indian economy’s high growth phase may be over tightening by US Fed whose repercussions would be felt worldwide. Also from stock market perspective a good story should be supported by good numbers but it should also be available at the right price. India growth story is here to stay but keeping eye on numbers will be prudent.
(Rashmi Saluja, Executive Chairperson, Religare Enterprises. The views expressed in the article are of the author and do not reflect the official position or policy of FinancialExpress.com. Please consult your financial advisor before investing.)