India’s economy was innocent 2018. Will next year be better?

Narendra Modi took power in 2014 with promises to move the Indian economy to new heights and create jobs for millions of young people. But the Indian prime minister faces a painful election battle next year amid questions about his handling of a weak economy in recent months. Here’s where things stand before a crucial election in 2019: Decline in growth India’s economy progresses in the first half of 2018 after spending much of last year recovering from a comprehensive tax reform and shock decision by Moody’s blocking most of the country’s funds. Growth accelerated to 8.2% in the quarter ended June 2018, the fastest rate of any major economy. India still retains this distinction, but growth fell sharply to 7.1% in the last quarter. GDP data for the fourth quarter of 2018 are expected in February and could affect Moody’s appeal to voters while seeking a second term as prime minister. Read more about India The future of the Internet is Indian My trip from the Silicon Valley in India to the “no network area” Unilever spends billions to enhance its presence in India Ikea wants to help solve the air pollution crisis in India Voters will also pay attention to Moody’s efforts to promote job creation . About 12 million Indians enter the labor market each year, but many struggle to find work. India does not publish official employment data, but a recent study by researchers at the University of Great Primage concluded that “an increase in unemployment is clearly visible throughout India.” The Rupee Problem The Indian rupee hit a series of record declines in 2018 and is classified as one of the worst Asian currencies. Despite a slight recovery as the year draws to a close, it is still almost 10% lower against the US dollar in 2018. The currency will weaken next year due to political uncertainty about the election and concerns about the independence of the Indian central bank. Analysts at Capital Economics in a recent note. Prime Minister Narendra Modi. The turmoil at the top of the bank deals with the darkest cloud on the economic horizon of India with its central bank, the Reserve Bank of India. Former Central Bank chief Orgit Patel abruptly stepped down in early December – nine months before the end of his term. While Patel said he resigned for personal reasons, his departure was preceded by a general disagreement between the central bank and Moody’s government. The government was reportedly pressuring the bank to do more to boost growth before the election, analysts told CNN that Patel may be “no longer able to withstand” this pressure. Moody did not waste any time in replacing Patel, as Chaktikanta Das, a former government finance official, was barely named after 24 hours. The hasty pledge by India’s central bank is a risky move. Das’ hasty call and his government’s record have raised concerns that the central bank’s independence is at risk. “His appointment is likely to keep investors and markets concerned about RBI’s independence because of its close relationship with the government,” said Priyanka Kishore, chief economist at Oxford University. Mr Kishore and other analysts expect the central bank, which has raised interest rates twice in 2018 and has remained firm since then, will cut them in 2019. What will happen next? Many of the reforms proposed by Moody, particularly land tenure laws and labor in India, have yet to be realized. His major reforms, such as changes in the tax system and the prohibition of criticism, have greatly disrupted the economy. Next year’s election may paint a different picture. “Prime Minister Moudi’s electoral victory may provide room for reactivation of his reform program after the 2018 recession,” said Shilan Shah, India’s leading economist at Capital Economics. Shah said Moody might seek to reduce routine business routines and increase India’s opening up to foreign investment. There is also likely to be another push for the privatization of state-owned enterprises. Other traditional pressures on the Indian economy, such as rising oil prices, have eased in recent months. But as one of the world’s largest energy importers, another rise could hit India strongly. Whatever happens in the elections will have major implications for India’s economic health. “Elections are likely to prove a turning point for the economy,” Shah said.


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