Page 18 - Synergy see page 60

Global Economy
Snapshot of Global Economy
The global economic outlook has again
turned rather sombre. Among the
advanced countries the only shining star is
United States but even there the projected
growth in the current year is expected to
be below 3%, lower than expected. In
Japan, which under Abe’s liberalization
policies was expecting an upward trend,
the economy has started wilting due to
consumer resistance to the higher sales
tax. Among Eurozone countries the
overall growth in the current year is likely during the last two years has lost its zing
to be only marginal 0.8%. The overall
global economy is expected to enlarge
by 3% in the current year as against 3.5%
projected earlier. The indications are
that quantitative easing in the US, which
has been largely responsible for spurt
in liquidity in the emerging countries,
is likely to end by October and this will
be accompanied by a hike in the cost of
borrowing. This will have an adverse
impact on the flow of liquidity into
emerging markets like India. While the
US economy is rebounding from the
financial crises the Eurozone has shown
no pick-up. In fact the European Central
Bank is moving in the opposite direction
18 SynergyZ December, 2014
to the US in a bid to rekindle growth and
inflation fearing Japanese style deflation
which lasted for over 15 years till 2002.
The saving grace on the global scene is
that emerging economies, particularly
China and India, continue to be the major
drivers of the moderate global expansion.
Economic advance in many BRIC
countries has been only marginal in
the current year. The Chinese economy
and is now expecting gain in the mid
term of around 7.5% as against over 10%
experienced in the last two decades.
The Indian growth story has now taken
a turn for the better after lack-luster gain decade. Huge loans exceeding $ 100
of 4.5% during the last two years. With
a majority single party government in
power and a strong leader like Narendra
Modi becoming the Prime Minister the
sentiment has dramatically changed for
the better. GDP growth is expected to be
over 5% in the current year rising to 6%
and 7% in the next two years. Inflation is
being tamed gradually thanks to reduction
in oil and commodity prices globally. The
fiscal deficit is under control and there is in India. The last budget has provided for
a sizable reduction in the current account
deficit to below 2% of GDP as against
4.5% earlier. The Forex reserves have been
rising steadily with larger inflow of foreign
investments. Rupee has appreciated by
10% from the low of US$ = Rs.68 last
year. The stock market has been buoyant,
showing a smart spurt in recent months
reflecting overall optimism in the future.
On the external front general perception
of India has changed dramatically. Japan,
China and USA are looking at India
more positively. Ambitious plans have
been drawn up for setting up 100 smart
cities and massive investment planned
for revamping infrastructure in the next
billion are being expected to flow in the
next decade to partly fund these projects.
India forging stronger and deeper ties
with major countries starting with Japan,
China and the
US is a harbinger for better times. Smart
cities is a fine augury for growth of small
and medium size industries, which holds
great promise for rapid industrial growth
a special fund of Rs.10,000 crores to assist
the SMES by way of start up capital and
soft loans.
The economic environment in India
is being rapidly transformed. This will
open up boundless opportunities for
young entrepreneurs which they must
grapple with at the early stage. Economic
development is a game of snakes and
ladders. Fortunately in an emerging
country like India there are more ladders
than snakes. What is called for is daring
and commitment to be adventurous and
succeed and not be overborne by the
risk of failure which is inevitable in any
endeavour.
There will be a burst of entrepreneurship
in the newer towns and cities in the
coming years. While India is already the
second fastest economy it is bound to
emerge as one of the largest globally in
the next 20 years with a GDP of over $ 20
trillion, against the current $ 2 trillion.
Now is the time for young entrepreneurs
to step up on the escalator.
By: Minoo Shroff