Nobody would have comprehended in the last financial year that the best performing economies will be struggling for breather; The speed with which clouds of economic gloom and even despair have gathered over the global economy has been startling everywhere.But the change has been especially sudden in the world’s two most populous countries: China and India.
Until quite recently, the world’s fastestgrowing big economies both felt themselves largely immune from the contagion afflicting the rich world. Optimists even hoped that these huge emerging markets might provide the engines that could pull the world out of recession.
Now some fear the reverse: that the global downturn is going to drag China and India down with it, bringing massive unemployment to two countries that are, for all their success,still poor-India is home to some two-fifths of the world’s malnourished children.
The pessimism may be overdone. These are still the most dynamic parts of the world economy.But both countries face daunting economic and political difficulties. In India’s case, its newly positive self-image has suffered a double blow: from the economic buffeting,and from the bullets of the terrorists who attacked Mumbai last year. As our special report makes clear,
India’s recent self-confidence had two roots. One was a sustained spurt in economic growth to a five-year annual average of 8.8%.The other was the concomitant rise in India’s global stature and influence. No longer, its politicians gloated, was India “hyphenated” with Pakistan as one half of a potential nuclear maelstrom. Rather it had become part of “Chindia”-a fast-growing success story.
The Mumbai attacks, blamed on terrorist groups based in Pakistan and bringing calls for punitive military action, have revived fears of regional conflict. A hyphen has reappeared over India’s western border, just as the scale of the economic setback hitting India is becoming apparent. Exports in October fell by 12% compared with the same month last year; hundreds of small textile firms have gone out of business; even some of the stars of Indian manufacturing of recent years, in the automotive industry, have suspended production.
The central bank has revised its estimate of economic growth this year downwards, to 7.5-8%, which is still optimistic. Next year the rate may well fall to 5.5% or less, the lowest since 2002.
