India’s slowdown has certainly been the most under-appreciated aspect of the current global downturn. In Q3 this year, the Indian economy reached a 6-year low at 4.5% YoY, down from 5% in the previous quarter. The current slowdown has a noticeable impact on global growth as the country’s contribution to global GDP is about 8% and it is expected to exceed US’ by 2024, at 15.5%.
All the leading indicators are confirming the slowdown will be prolonged: industrial production is out at minus 4.2% YoY in September, non-oil imports are at their lowest level since 2016 at minus 12.3% YoY in October, and vehicle sales and registrations are still in contraction at minus 6.3% YoY in October, after reaching an historical low point at minus 41% YoY in August.
In order to mitigate the slowdown, India has recently announced a surprise corporate tax cut, with the rate for the manufacturing sector now on a par with low-rate Asian jurisdictions, such as Singapore. However, it won’t be enough to turn the situation around and attract foreign investors back in the country.
In fact, India’s two core economic issues are related to weak external demand and, foremost, to the blockages in the financial system. The government and the RBI are facing a sharp liquidity squeeze along with banking instability which force them to bailout state-run banks. So far, the issue has been imperfectly addressed and we expect that the economic situation will get worse (meaning that GDP growth will evolve under 6% YoY for an extended period) before it gets better.
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
– Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
– Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
– Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)
