India’s economy is in recovery mode, says Finance Minister Arun Jaitley

30 May 2015 | Author: | No comments yet »

Canada’s Economy Contracts in the First Quarter.

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Finance Minister Arun Jaitley Friday said it was “absolutely clear that the economy is in recovery mode” after data showed that the economy grew at 7.3 per cent in 2014-15.NEW DELHI: The Indian economy expanded 7.3% in the year ended March, in line with the initial forecast and marginally higher than 6.9% recorded in the previous year, pointing to a soft recovery and strengthening the case for a rate cut on June 2 when Reserve Bank reviews monetary policy.

The economy clocked 7.5-per cent growth rate in the January- March quarter to surpass China as the fastest-growing economy in the world, official figures released on Friday showed.OTTAWA—Canada’s economy contracted in the first quarter as lower oil prices reduced business investment in the energy sector and household spending stalled. The data released by India’s statistics office on Friday showed gross domestic product (GDP) rose 7.5% in January-March 2015 compared with 6.7% —after a downward revision from 7.5% — in the October quarter, signalling a slight pickup. The same could be true in the United States, where a disappointing revision in growth numbers might be cause for pause in the Federal Reserve’s plan to begin raising its benchmark leading rate before the end of the year. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

India had also reported a faster growth than its bigger Asian neighbour in the October-December quarter, but the Central Statistics Office (CSO) on Friday slashed the number to 6.6 per cent from 7.5 per cent earlier. The performance was the country’s worst since the global financial crisis and fell short of economists’ already low expectations, which were for a 0.3% advance in the January-to-March period, according to a report from Royal Bank of Canada. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs.

Our potential to grow into a higher league is certainly there,” FM Arun Jaitley said, adding the economy had been held back by the agriculture sector because of a poor monsoon last year, calling for greater investment in irrigation. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. But the bigger picture worth focusing on, as the Reserve Bank of India (RBI) governor Raghuram Rajan has alluded to in many recent speeches, is the global fight for a larger piece of the international demand for goods and services at a time when domestic demand in a number of economies remains weak. Economists and policy markets are divided over whether the worst is over for Canada, or whether the negative spillover from lower energy prices will continue to pose a stiff headwind to growth.

During the fourth quarter while the manufacturing sector output grew by 8.4 per cent, the services sector—including trade, hotels, transport and communications— clocked a robust growth rate of 14.1 per cent. Given that this is a zero sum game, it’s worthwhile to take a look at who is winning and who is losing, although, in the long term, it looks like no one wins. There has been some debate about the economic numbers generated after India adopted a new data series earlier this year. “There is some disconnect between the GDP numbers and the situation on the ground,” said DK Joshi, chief economist at Crisil, adding that the central bank may choose to ignore the latest data.

In particular, experts are concerned with the 9.5% growth in credit in FY15 and the 2.8% rise in factory output as measured by the Index of Industrial Production (IIP), which they say is not consistent with the high GDP growth. Household spending, which has helped drive Canadian growth in previous quarters, advanced at its slowest pace in almost three years on a steep fall in overall national income. Friday’s report was much worse than the central bank’s own zero-growth forecast and greater than the consensus among economists, who had called for an annualized gain of 0.3 per cent. Apart from its traditional strength in the export market, Germany would have clearly benefited from the weakness in the euro, which has given it an upper hand in the export market. The problem is that two of Germany’s key markets—China and the US—are seeing a slowdown in growth partly because of weaker exports, which will eventually come back and bite Germany.

They had almost taken them out of the equation earlier on but with this generally disappointing slate of data [Friday], the bank is seen as back in play,” BMO’s Porter said. The bank, along with Canadian Finance Minister Joe Oliver, anticipate a stronger expansion through the rest of 2015, led by exports from the non-energy side of the economy that will be supported by firmer U.S. growth, a weaker Canadian dollar and low borrowing costs.

Others suggest the recovery will take longer to unfold, as the billions in cuts in spending by energy firms—which accounted for 17.7% of total capital expenditures and 3.6% of Canadian GDP in 2014—will weigh heavily on economic activity for months to come, offsetting any non-energy gains. The government appeared satisfied with the way the economy was performing. “The encouraging part of the data is the growth in manufacturing to 7.1% from last year’s 5.3%, which would also mean that we are creating jobs in our growth path,” Finance Secretary Rajiv Mehrishi said. Chief Economic Advisor Arvind Subramanian expects the economy to do much better in the current fiscal and retained his 8.1-8.5% forecast for the year. “The good news is that manufacturing has picked up from last year substantially and also it has picked up from the third quarter,” he said. “The picture looks better,” said chief statistician TCA Anant. Manufacturing growth picked up further in the January-March period, rising to 8.4%, but construction slowed to 1.4% and agriculture contracted 1.4% because of the damage caused by unseasonal rains in March.

Canada’s terms of trade, or the difference between what the country receives for its exports versus what it pays for goods made abroad, deteriorated for a fourth-straight quarter. The statistics department dismissed concerns over data. “The MCA (ministry of corporate affairs) database allows us to capture a wide range of smaller and medium enterprises unlike earlier when only 5,000 listed companies would be tracked. There were large revisions in numbers when ASI (Annual Survey of Industries) data would come out earlier because it provided larger coverage,” Anant said.

Countries can tinker with their currencies to try and grab a slightly larger share of exports, but if in the process aggregate global demand is hurt, everyone loses. If exports weaken further and the import bill starts to climb as commodity prices normalize, the current account deficit will widen and add to discomfort that investors are feeling towards India.

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