Strong Economic Outlook For India Heading into 2013

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Dec. 11 – It was recently revealed that India’s GDP grew by only 5.3 percent between July and September compared to a year earlier. This marked the third consecutive quarter of growth below 6 percent, and raised concerns that India may be on track for its worst year in a decade. However, recent reports have suggested that India’s economy is instead expected to revert back to growth levels in excess of 6 percent next year.

Moody’s Investors Service has stated that India’s sovereign rating outlook is stable. This is based on a high household savings rate, a relatively competitive private sector, and the assumption that there will be a cautious decrease in monetary policy rates and the implementation of further measures designed to increase investor confidence. Due to this, India’s GDP is predicted to increase to 6 percent or higher in 2013-14.

A report from Goldman Sachs similarly said that India’s economy is likely to grow by 6.5 percent in 2013 and by 7.2 percent in 2014. According to the report, this will be due to the continued “easing financial conditions, in part driven by some reduction in policy rates, a continuation of reforms boosting confidence, and a normal agricultural crop.”

India also has topped HSBC’s trade confidence index, with 61 percent of traders expecting to see growth.

“With a score of 135, India is the most confident country. Optimism has improved in the past six months with 71 percent of importers and exporters surveyed expecting trade volume to increase, and another 24 percent anticipating business to remain at current levels,” said the report from HSBC.

The report, which surveyed 23 of the largest trading markets in the past 6 months, further noted that it is India, backed by its growing consumer wealth, that will become the fastest growing trade market.

Indian manufacturing has also been predicted to become the world’s second-most competitive in the next five years, according to the Global Manufacturing Competiveness Index. This global index, compiled by Deloitte Touche Tohmatsu and the U.S. Council on Competitiveness, may at first be surprising considering India’s manufacturing grew by only 0.5 percent in the first half of this financial year. Nonetheless, according to the global index, this year India was ranked as the fourth-most competitive manufacturing nation, behind only China, the United States and Germany.

“India’s focused and comprehensive national manufacturing strategy, democratic governance and infrastructure development over the next five years may unlock the potential for CEOs around the world to see this rising star,” the index said.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

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