Few people fully appreciate just how fast India is growing. Paul French explains.
India is now the fastest growing significant economy in the world – 7.6% growth last year and roughly the same expected this year – but still gets surprisingly little coverage compared to the fluctuating United States, troubled Europe or slowed down China. But India is big news.
Consider this statistic alone – India is forecast to soon overtake Japan, China and the US as the world’s largest consumer (and importer) of oil. That is a massive geopolitical and geoeconomic shift. India will, in 2016, import more inputs for manufacturing than China for the first time ever. That too is crucial to understand the two sides of India’s economic story – the ramping up of production and manufacturing on one hand and the inevitable insatiable demand for energy and inputs to feed the production beast on the other. Basically India is now really starting to look like China in the 1990s.
Oil is a good metric for India right now. As well as needing it to feed the manufacturing growth it is essential for consumer growth too – car sales are up 11% in a few years, according to the Society of Indian Automobile Manufacturers; motorbikes and scooter sales are up by far more, in excess of 40%. Nobody, manufacturers and consumers included, has benefitted from lower oil prices in the last 18 months more than India.
Consumer confidence appears strong in India – witness the growing middle class and, important given the size of the government bureaucracy, a 24% pay hike for central government workers. That pay hike was long awaited and should both boost consumption as well as limit corruption, hopefully.
Not everything in the Indian garden is rosy of course. Private investment remains sluggish; agriculture hasn’t been improving productivity as much as hoped for (though this year’s monsoons and their effects presage a rise in productivity in later 2016 and 2017). Indian politicians have been among the most vocal to state that they see enhanced trade opportunities with their historic trading partner, the UK, post Brexit.
So India seems to be sailing with a strong headwind at the moment and avoiding most of the pitfalls of the global economy. Analysts point out that some tinkering might help to restrain inflation somewhat and, as ever, there is always a call for Narendra Modi to accelerate the reforms he promised in 2014, upon assuming office, and which have been slow in coming.
One final shaft of positive light, especially perhaps for shippers – after 18 consecutive months of decline, India’s exports inched up by 1.27% in June.
This article first appeared in Maritime CEO Issue three 2016. Read the full magazine here.