Falling exports and surge in inflation place India behind it’s peers

India fell to the eighth position in the emerging market league tables in October, marking its worst performance since June.

Since June, India was at the bottom but improvements in factory production and buoyancy in the financial markets elevated India’s rank in the league tables. In September, India ranked fourth among the 10 emerging markets covered in the tracker. But it reversed in October according to the latest available data because some countries reported improvements in their Gross Domestic Product (GDP) growth during the September quarter. India, which has not yet reported GDP numbers for the September quarter, stands at the bottom of the heap on this front because of a sharp GDP contraction of – 24% in the Jun-ended quarter.

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The Reserve Bank of India expects the contraction in India’s GDP to slow to – 8.6% in the September-ended quarter. It will be a sharp contraction compared to the September quarter GDP growth of other Asian counterparts such as China (4.9%), Indonesia (-3.5%) and Malaysia (-2.7%).

Because of a sharp decline in merchandise exports and a surge in inflation India’s relative economic position declined. In Turkey, where inflation is at double-digits, India has the highest inflation among emerging markets peers. The gap between India and the emerging markets average has been growing over the past few months.

Acceleration in inflation and a downturn in exports has weakened India’s overall performance in the real economy segment. The decline in India’s merchandise exports was largely due to a drop in the shipments of petroleum products but growth in non-oil exports slowed too.