India's economy worst-hit among emerging markets

Chennai: Among the emerging nations, India seems to be the worst affected by the Covid-19 pandemic as the strength of the economy has deteriorated the most in India in the first half of 2020, finds a study.

The Investors’ Macro Ratings Index, which looks at investors’ perception of the economy based on parameters like real GDP growth, inflation, fiscal deficit and bank credit, has deteriorated in all the emerging economies, as per a report by Motilal Oswal Financial Services. However, India was the most affected in the first half and Taiwan was the least affected. The study examined macro-economic parameters in emerging economies like India, Brazil, China, Indonesia, South Korea, Malaysia, Russia, South Africa, Taiwan and Thailand.

As per IMF’s projection, India’s real GDP growth is expected to contract 10.3 per cent in 2020, which is the highest contraction among the 10 emerging markets. India is also the only economy with a double-digit contraction. On the other hand, China is expected to see 1.9 per cent growth, the highest among all of them.

 At 4.9 per cent retail inflation in 2020 will be the highest in India. Inflation has eased in most of the emerging economies, except India. Average inflation during the nine-month period of 2020 has more-than-doubled in India, while in most of the emerging nations it was lower than the same period in 2019.

 At 7.2 per cent, the fiscal deficit too is high, but not the highest. China, Brazil and Russia have higher fiscal deficits than India. Macro-Vulnerability Index, which calculates macro risk based on inflation, fiscal deficit and current account deficit, also is not favourable for India.

While India along with Brazil has the highest government debt, private non-financial sectors’ leverage is among the lowest. India’s government debt stands at 72.2 per cent of the GDP and private non-financial debt is at 57.8, indicating lower levels of leverage.

India has also seen one of the lowest credit growth. While India’s central bank has seen the highest expansion of its balance sheet, a similar growth is not visible in money supply.

The data till August also shows that India is one among the emerging countries which saw a higher decline in merchandise exports. Till August, India’s merchandise exports had declined 18.3 per cent, only lesser than Russia with a contraction of 24.4 per cent. While Taiwan saw a growth of 2.4 per cent, China had a marginal decline of 0.8 per cent.