I understand from stock bulls that central banks have got all this under control. That’s good, because even India, the world’s fastest-growing large economy, has taken its growth rate estimate for the current fiscal year ending March 31 down to 5%–the slowest growth rate since 2009 and compared with a peak of 8.2% in 2017. See India’s Modi faces a new challenge: a slowing economy:
…But Arvind Subramanian, a Harvard economist who served as Mr. Modi’s chief economic adviser during much of his first term, has questioned whether the headline economywide measurements may be flawed, meaning even the 4.5% growth rate the government reported for the latest quarter through September 2019 could be overstated by several percentage points.
He notes that imports, exports, consumption and domestic investment are all in outright decline and overall electricity consumption is flat, an almost unprecedented confluence of bad news since the economy was first liberalized during a crisis in 1991.
He argues that the still-festering load of bad loans at the banks is standing in the way of a near-term economic turnaround by crimping lending. The painful task of reforming the financial sector will likely need to be followed by politically difficult changes to bring more flexibility to land use and labor laws.
As in most countries today, dramatically slowing growth is making it harder to create jobs, cover expenses, repay loans and save/invest for the future. This is feeding rising social unrest and instability as well as a surge in loan defaults and writedowns. The latter is a clear and present problem for euphoric financial markets.
