The other BRICS
economies tell a broadly similar story, though not for exactly the same years. Russian growth has dropped from about 7 per cent in the high-growth years to half of 1 per cent in the most recent period. Brazil, prone to large swings, recorded 4 per cent growth in the four years to 2013 before slipping deep into negative territory. It has managed barely 1 per cent in the three most recent years. China too has slowed down, managing growth at just half of its best years, and will slip further in the wake of the Coronavirus
Other emerging markets
tell a similar story: Turkey’s drop, for instance, is from 8 per cent in the best years to 5.5 per cent, and now to less than 3 per cent in the last couple of years. When these very different economies tell the same story of rapid growth yielding to more modest numbers, we should be paying more attention to international trends, especially those in other emerging markets.
Four issues are of note. The first is the danger of Coronavirus
becoming a pandemic — a risk that has entered the consciousness of markets everywhere. The second is the slowdown in the global growth of trade. The World Trade Organization puts growth in global merchandise trade at the same rate as economic growth, when for nearly two decades trade growth had averaged a 40 per cent faster rate than the world economy.
The change is partly because of friction between countries and consequential protectionism, but there are other reasons as well. No quick recovery of trade should be expected.
A third factor is what the World Bank
notes as a slowdown in productivity growth across emerging markets.
This is certainly evident in India, since economic growth has dropped more than investment rates. In other words, India now needs more investment than before, for delivering the same rate of growth. Finally, there are the risks that come with the global pile-up of debt, creating abnormal money markets with an abundance of negative investment rates. A former chief economic advisor has suggested that India is one of the countries more vulnerable to potential shocks.
All these come on top of the domestic challenges of raising savings and investment rates, improving human resources, boosting productivity levels on farms (mostly at barely half of international levels), finding solutions for the worsening fiscal stress, creating jobs through the right mix of policies, and making government intervention in markets less disruptive. Even as the cyclical factors play out, the speed and quality of the recovery will depend on these long-neglected tasks being addressed. Absent that, while growth will bounce back from the current sub-5 per cent, it will stay lower than the already inadequate long-term average of 6.6 per cent. As unsatisfactory as that may be, in the current global context it will nevertheless be something to be grateful for.