The Indian market became the best performing market in 2018 with 5.93 percent growth. On the other hand, Chinese stock market registered worst performance and shed almost quarter of its value. The other emerging markets in Asia also performed very badly. South Korean stock market lost 17.3 percent, Taiwanese market lost 14.7 percent, Japanese Nikkei lost 12 percent, and Singaporean market lost 10.3 percent value. The Indonesian market also shed 2.54 percent of the value. So when almost all the emerging markets and even the developed markets across Asia performed very badly then what pushed the growth in the Indian market?
The economic policies of Modi government were the prime reason behind such a positive cue from Indian market. The Modi government has maintained macroeconomic health of the country through good governance and economic reforms. The inflation is under control, credit is growing, and fiscal deficit was brought below 4 percent from near double-digit in second term of the UPA. The implementation of Insolvency and Bankruptcy Code (IBC) is proving helpful in solving the NPA problem. The Modi government’s decision to move from ‘stigmatized capitalism’ to embracing capitalism completely through IBC has been especially helpful in boosting sentiments on domestic economy and increased the trust of global investors in India. The sound macroeconomic fundamentals of the country boosted investment in India.
Emerging Markets
The markets across Asia lost value because the investors from capital rich west moved to their own countries given the performance of western economy. The central banks of United States and Europe raised interest rates as their economies were moving northwards and inflation was growing. The increased interest would help the investors in getting better returns in western markets which they consider relatively ‘safer’. On the other hand, countries like China struggled with economic growth given the global trade war. The major economies of Asia like China, South Korea, and Taiwan are primarily dependent on exports for economic growth therefore they were hit hard by trade war and increasing protectionism in west. The Morgan Stanley Capital International (MSCI) in Emerging Market is down by 17.8 percent and MSCI Asia is down by 11.5 percent.
US Fed Rates
The overall performance of global markets was also bad as MSCI World shed the value by 16.3 percent. The slowdown in global markets was due to Chinese and American market performance.
So the Indian economy is the fastest growing major economy in the world despite the rout across Asian markets. Indian economy is overtly not dependent on exports and less closely linked to the global economy. Domestic consumption fuels Indian economic growth and this is a major strength as well as weakness of the country. The Indian economy was resilient even in late 2010s when the world was facing economic slowdown of worst kind since 1929 meltdown.
The writing on the wall is that India is the future of Asia and it will drive the Asian as well as global growth in upcoming decades. The future belongs to India as the country is moving on sound macroeconomic fundamentals. The decline in oil prices and positive domestic sentiment will fuel Indian march towards global superpower.