While India is less integrated into the global value chain than ASEAN countries, it is also seeing the impact of global trade tensions.
India’s GDP is likely to grow at 6 .6 per cent in 2020-24 lower than its 2013-17 average of 7.4 per cent and will be more modest in the medium term while the banking sector regains its footing even as China’s GDP growth will continue to slow at 5.6 per cent in the medium term from its 2013-17 average of 7.1 per cent, said Organisation for Economic Co-operation and Development (OECD) on Saturday.
OECD its report titled Economic Outlook for Southeast Asia, China and India 2020 said that while reliance on consumption will continue, the large informal labour share indicates that there is room to strengthen the consumption base. It added that the country must continue to focus on boosting the health of the banking sector while bridging the disparity in urban and rural infrastructure. This is “important for spreading investment and economic opportunities while addressing urbanisation.”
The buoyant government spending could not prevent growth from slowing sharply in Q1 2019 of FY20, the report said adding that private consumption growth has softened markedly from over 4 per cent in 2017 and 2018 to under 2 per cent in Q1 2019, taking away substantial economic growth fuel in the process. “The same can be said of exports, although the trade deficit narrowed from the previous year, with import growth scaling back at a sharper rate,” it added.
While India is less integrated into the global value chain than ASEAN countries, it is also seeing the impact of global trade tensions. The report added that India’s exports have lost steam, including to the US and China even as imports of Indian goods have also moderated in ASEAN and large East Asian countries such as Japan and Korea along with European Union and UAE.
Overall, the region is expected to record 5.7 per cent growth on average in 2020-24. However, exports continued to reel from trade tension headwinds accompanied by a softening of fixed investment.