09/01/2015, 00.00

India feels China crisis, as growth halts at 7%

The figure refers to the last quarter. The crisis in the Chinese market offers new opportunities for expansion for India. Expert says: "China will not disappear from investors radar". Lack of private investment in India, amid need for an increase public spending. Infusion of capital announced by New Delhi will not remedy the difference of money required by state banks.

New Delhi (AsiaNews / Agencies) - India's economic growth stood at 7% in the quarter from April to June 2015, and is lower than the expected 7.5 percentage points. The Indian market is closely following the crisis in China, which in August recorded a drop both in  manufacturing and industrial production. According to some, the slowdown in China could encourage more foreign investment in India, but other experts warn that New Delhi will not replace Beijing in driving the global economy in the short term.

The setback of the Indian economy is a blow to Prime Minister Narendra Modi, who was elected last year with a promise to accelerate growth and create new jobs. Published today, the data shows that in the last quarter of 2015 India grew by "only" 7%, equaling the growth rate in China.

According to some commentators, concerns over the continuing crisis of the Chinese market could lead investors to direct their capital to the Indian sub-continent. But the Times of India today quoted an economist at HDFC Bank [fifth largest bank in the country - Ed] who reports: " There's a lot of emphasis that's being put on the opportunities that lie ahead for India and not too much attention is being paid to the challenges that remain today ". First of all, the lack of investment in the private sector. For this, the newspaper reports on the proposal put forward by some government bureaucrats to cut interest rates up to 50 percent, in order to encourage the private sector spending.

Alternatively, to offset the lack of private sector, the Firstpost stresses that the only alternative would be to increase public spending, as the government has already announced. "But the state banks – continues the site - which usually lend money for high-risk, long-term projects are capital constrained. Rating agencies have also noticed that the capital infusion of 70 thousand crore [700 billion Euros - ed], recently announced by the government, will not be enough to bridge the difference of capital required by state banks. "

For this reason, Karishma Vaswani, a correspondent for the BBC from Asia and an expert in economics, says: "The reality is that India will not replace China as head of global growth. Its economy is only one-fifth of China's. Despite all the problems that now afflict  Beijing, it will not disappear completely from the radar of investors. There is no doubt that the slowdown in China will offer India expansion possibilities, but this means that India must act quickly to take advantage of them".

Printable version
See also
Growing unemployment in the Philippines, also due to corruption and waste
Hong Kong government short on answers to financial tsunami
After Europe, the crisis hits the Indian economy
Asia, rain and pollution obscure the eclipse of the century
Good news for the recovery of the Indian economy