AGI’s Business Correspondent, Ashutosh Misra, gives an insight into the latest developments of the two Asian giants India and China in the month of November,2012.
he two engines of global growth, China and India, are at crossroads today. The benefits of growth have not percolated to the lower strata of the society and rising inequalities and social unrest represent a challenge for both. The two Asian giants seem to be recovering from slowdown, and decisions made now will have long-term repercussions.
The two Asian giants seem to be recovering from slowdown, and decisions made now will have long-term repercussions.
India’s manufacturing sector grew at its fastest pace in five months in November, according to the HSBC manufacturing Purchasing Managers’ Index (PMI) survey. But sharp rise in prices of raw materials and products are dampeners. For China, the November survey found the pace of manufacturing sector increasing for the first time in 13 months.
For India, there is no respite on the inflation front, which at 7.5% in October breaches the 5% comfort mark of the Reserve Bank of India (RBI). It makes things difficult for RBI, which is already facing intense pressure from the government and industry groups to lower the lending rate. RBI governor Duvvuri Subbarao last week said the central bank may review (read raise) the inflation rate it targets. A loose monetary policy will spell trouble as the spendthrift Manmohan Singh government will prefer to splurge with an eye on the 2014 elections to fiscal prudence and inflation control. China needs consumer spending to put growth back on track but this will be a tough ask for a stratified society with a frail middle class. Weak demand at home and abroad will impede growth.
China needs consumer spending to put growth back on track but this will be a tough ask for a stratified society with a frail middle class. Weak demand at home and abroad will impede growth.
Rising social pressures may lead to the Communist Party using less of stick and more of populism to control strife. The meek may still be a long way from inheriting the earth but they are no longer ready to take things lying down. Governments who ignore them, whether democratic or authoritarian, are living on borrowed time.
