Russia’s invasion of Ukraine on February 24 has added to inflationary pressures, and prompted a fall in India's stock market capitalization, pushing the country down to the third rank among the emerging markets (EMs), as per the latest update to Mint’s monthly EM tracker.
Brazil, which was one of the first to raise interest rates last year, emerged on top, gaining from sanctions on Russia, followed by the Philippines.
Mint’s Emerging Markets Tracker, launched in September 2019, considers seven high-frequency indicators across 10 large EMs to assess India’s relative position in the league table. It is updated around three weeks after a month ends once all data becomes available.
From November 2021 to January 2022, India had outperformed its EM peers owing to a steady economic recovery despite the threat of the third wave of Covid-19. However, the recent economic indicators are showing that the economy is yet to pick up ahealthy pace and the Russia-Ukraine war has added pressure to the economic indicators.
The Index of Industrial Production (IIP) went up marginally in January 2022. Industrial output as measured by the IIP edged up to 1.31 percent in January, the second-lowest reported growth so far this financial year. In December, the country's industrial activity had slumped to a 10-month low at 0.7 percent. IIP index takes into account all goods produced in factories located in a country's borders.
Moreover, The third-quarter GDP data showed Indian industry grew at a subdued pace, attributable primarily to the sluggish domestic demand.
Global financial firm Morgan Stanley has slashed India's economic growth forecast by 50 basis points to 7.9 percent for the financial year 2022-23. Furthermore, the US investment bank and financial services company raised the country's retail inflation estimate to 6 percent.
Kotak Securities in a report highlighted that India's FY23 real GDP growth may come between 7-8.1 percent.
"Under various scenarios of average crude prices (US$120-80/bbl), we estimate FY23 real GDP growth between 7.0-8.1 percent. Given the volatility in commodity prices and probable outcomes of the geopolitical tensions, the adverse risks to India’s inflation and growth outturns remain high," Kotak said.