India’s prospects: one (huge) positive and three risks

India’s prospects: one (huge) positive and three risks

• India’s economic prospects will be driven by a burst of entrepreneurial activity, the seeds of which were planted by expanding access to digital and financial services.
• However, to sustain a true economic take-off, India needs better approaches to its structural weaknesses such as macroeconomic management, a closed attitude to international trade and investment, and socio-religious cleavages exacerbated by politics.
• These flaws may not fully derail India’s growth prospects, but they are risks to the economy’s ability to sustain its long-run momentum. We offer examples from Indonesia to show that alternative policies are available to remedy these weaknesses.

Beijing shows signs of shifting towards policy pragmatism

• After years of playing hardball on deleveraging the property sector, Beijing has now instituted measures that effectively place a floor for housing prices.
• “Wolf-warrior” diplomacy is also being set aside as China seeks to re-engage with international partners on friendlier terms in economic and geopolitical matters.
• With these shifts, further economic support such as accommodative fiscal policy and aid to SMEs are on the cards. The jury is still out on whether these are sufficient.

Regional updates

• Malaysia’s central bank surprised markets by hitting the brakes on rate hikes, indicating that growth concerns are at the forefront. We expect no further hikes for 2023.
• Indonesia’s central bank raised its policy rate by 25bps. Easing inflationary and currency pressures point to peak rates by 1Q23.
• Taiwan experiences a shock contraction in 4Q22 GDP, risking a technical recession.
• Vietnam’s president is the latest senior official to be purged amidst graft scandals.
• Singaporean exports ended 2022 on a weak note. An accommodative budget is likely.

We wish our readers a happy and prosperous Lunar New Year, great health and success in the year ahead.

Read more: CAA-Weekly-23-Jan-23.pdf