The year 2013 started with tail risks recede in the global economy due to policy reforms taken by some developed countries. The financial market conditions have improved noticeably in the past half year or so, but the real economy continues to lag. Many developed economies are caught in downward spiralling dynamics due to unemployment, weak aggregate demand compounded by fiscal austerity, high public debt burdens and financial fragility. The economic woes of the developed countries are spilling over to developing countries and economies in transition, through weaker demand for their exports and heightened volatility in capital flows and commodity prices.

The prospects for the next two years continue to be challenging, fraught with major uncertainties and risks slanted towards the downside. The report of IMF had forecasted that the world economy is strengthening. But it is happening by small degree. World economic growth has reached 3.3 percent in 2013, expected to improve slightly to 4 percent in 2014. However, the report of first quarter of 2013 suggests a slow pace of real growth; underlining the downside risks for global growth. However, growth in Europe shrunk more than expected and persistent weakness in the margin and policy uncertainty is increasingly affecting confidence in the business; China reported sluggish growth in the first quarter; and investment in India, Russia, and South Africa continues to be sluggish.

Due to changing global economic perspectives, Indian economy resulted in a slow down and the growth of GDP decelerated in recent years. Foreign institutional investors made huge transfer of foreign currency causing a fall in foreign exchange reserve of the country and also in the value of rupee. While US economy is banking on recovery due to bailout packages by the US Government, adverse ranking by international rating agencies, like Standard and Poor’s, has caused setback to the policy makers. With these problems cropping up, India is facing the heat. Widening trade deficit, high crude oil prices, falling foreign exchange reserve and depreciating rupee are the imminent dangers to the changing Indian economic perspectives.

After Indian economic recovery and rebounding of GDP growth to 8.4 percent in 2010-11, growth rate once again nosedived to 5.5 percent in 2012-13. Inflation continues to be the cause of worry for the Indian government. Reserve Bank of India is making all round efforts to tide the monetary policy to control inflation.

A more significant slowdown is expected for less mature economies over the next year and beyond. Overall, growth in developing and emerging economies is projected to drop from 5.5 percent in 2012 to 4.7 percent in 2013, with economic growth falling in China from 7.8 percent to 6.9 percent and in India from 5.5 percent to 4.7 percent. From 2019 to 2025, emerging and developing countries are projected to grow at the rate of 3.3 percent.

To address the key issues related to changing global economic perspectives, Jaipuria Institute of Management, Vasundhara, Ghaziabad is organising a two-day International Conference on February 8-9, 2014 where eminent persons from academia, corporate, government institutions and policy makers will share their strategic views to come up with the economic policies for managing sustained and inclusive growth.

 

Dr Daviender Narang, Director, Jaipuria Institute of Management, Vasundhara, Ghaziabad