From Underwear to Cars, India’s Economy Is Fraying

Until last year, India, with a population of 1.3 billion people, was the world’s fastest-growing large economy, routinely clocking growth of 8 percent or more. Now the government pegs the country’s growth at 5 percent. And the layoff notices are piling up, with unemployment at 8.4 percent and rising, according to the Center for Monitoring Indian Economy.

India’s reversal of fortunes, partly driven by domestic problems like neglected farmers, is ominous for other developing countries in Asia, Africa and Latin America that are trying to navigate both the weakening global economy and Mr. Trump’s fusillade of trade conflicts.

“India is potentially a bellwether,” said Per Hammarlund, the chief emerging markets strategist at SEB, a Swedish bank. “It’s a sign of the global economic trend right now: Growth has slowed further this year than last year.”

As skittish global investors have flocked to the safety of the dollar, India’s rupee and other emerging-market currencies have plunged in value. That has made vital imports of energy, electronics and factory equipment more expensive. Last weekend’s attack on two Saudi Arabia’s oil facilities, which sent the global price of oil soaring, underscored just how vulnerable India and other developing countries are to external factors beyond their control.

Like China and Indonesia, India is grappling with the fallout from years of excessive lending encouraged by the state. In India’s case, the overhang of bad bank loans, coupled with recent defaults by nonbank financial firms, has curbed lending to consumers and businesses.

Policy decisions by India’s central and state governments have worsened the country’s downturn, according to economists and business leaders.

Article source: https://www.nytimes.com/2019/09/21/business/economy/india-economy-trade.html?emc=rss&partner=rss