It never rains, but it pours. Close on the heels of the Reserve Bank lowering the GDP growth rate projection for the current fiscal to 5%, the International Monetary Fund, in its World Economic Outlook Report, has slashed India’s expected growth rate for 2019-20 to 4.8%. This is the sharpest reduction of projections for a developing economy, considering the IMF estimate was 6.1% in October last. Gita Gopinath, the IMF’s chief economist, has emphasised that stress in the non-banking financial sector and weak growth in rural income has pulled down GDP growth. It is also a matter of concern that the IMF sees India as a drag on the global economy that has slowed substantially to 2.9%.
There is light at the end of this dark tunnel though as the IMF report says we are at the bottom of the trough. World economic growth will improve modestly hereon, while projections for India are a robust 5.8% and 6.5% for the next two years. There is another interesting silver lining that illustrates what is ‘bad performance’ is always relative. A PwC survey of nearly 1,600 CEOs worldwide, released at Davos, shows that India has managed to retain its position as the fourth-most attractive market, after the US, China and Germany. And 9% of the CEOs surveyed believe India remains among the most important regions for the growth of their organisations. Significantly, the level of confidence among CEOs has remained unshaken.
The takeaway is not to lose heart and build on the goodwill the country has generated as an investment destination. The amount of infusion of international capital though is umbilically linked to ensuring the long-term stability for business in our country. For this to happen, there has to be a good investment climate. Further, the perception that our regulatory system cannot be relied on and is often tweaked under the pressure of political expediency has to be tackled.