India sheltered from eurozone woes but faces problems – economist

27 June 2012 10:02  [Source: ICIS news]

LONDON (ICIS)--Of the Asian economies, India’s is the least exposed to the troubles currently radiating from the eurozone, but it still faces significant domestic challenges, an economist said on Wednesday.

Adam Jarczyk, Practice Leader, Asia Pacific, Frontier Strategy Group, classified the major Asian economies according to their economic exposure to the European downturn.

India, because of a relatively low correlation between GDP and exports, as well as suffering only a small decrease in exports during the financial crisis of 2008, was assessed as the least exposed by a considerable margin.

China, Thailand, Indonesia, South Korea and Hong Kong were associated with moderate exposure.

Taiwan, Singapore, the Philippines and Malaysia suffer from the highest exposure, according to Jarczyk, who was speaking at the 6th ICIS Base Oil & Lubricants conference held in Singapore on 2728 June.

However, despite India’s relatively sheltered position, the prospects for its economy are far from good. For a range of domestic reasons, the Indian rupee is devaluing, which means the cost of imports is increasing. Not only is India one of the world’s largest net importers of oil, its government also subsidises fuel costs, which it dares not halt for fear of angering low income voters.

As the cost of oil imports rise, so too does the cost of fuel subsidies, and with this the size of the fiscal deficit.

“India is caught in a downward spiral,” said Jarczyk.

Conversely, Jarczyk was optimistic regarding the Chinese economy. He said the Chinese government’s recent lowering of the country’s growth target from 8% to 7% should not be met with alarm, as “China has consistently outperformed its growth targets for the past decade.”

Furthermore, China has started to implement the kind of growth stimuli which sheltered it from the 2008 downturn.

By: Ross Yeo
+44 208 652 3214

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly