India’s business cycles well synchronized with China : PHD Chamber

India’s business cycles well synchronized with China : PHD Chamber

India’s business cycles well synchronized with China : PHD Chamber

 

No.PR-139
November 21, 2015
New Delhi

 

India’s business cycles well synchronized with China : PHD Chamber
 

India’s convergence of business cycles with China has been increased significantly. The bilateral correlations of India’s inter linkages with China has been observed highest at 0.78 during the 1996-2014 period followed by Brazil at 0.65, said an analysis conducted by PHD Research Bureau of PHD Chamber of Commerce & Industry
 

The bilateral correlation between India and Indonesia is quite low at 0.22 and negative with Russia (-0.01) and U.S.A (-0.06).
 

Given the fact that both India and China did not experience a recession, but a milder counterpart called a slowdown, thereby making the two economies more synchronized. Further, the proximity between the two nations and the trade relations add to the complementarities, said the industry body.
 

India’s bilateral correlations of business cycles

1996-2014

Brazil

China

India

Indonesia

Russia

U.S.A

Brazil

1.00

0.86

0.65

0.56

0.1

-0.25

China

0.86

1.00

0.78

0.58

0.01

-0.29

India

0.65

0.78

1.00

0.22

-0.01

-0.06

Indonesia

0.56

0.58

0.22

1.00

-0.06

-0.38

Russia

0.1

0.01

-0.01

-0.06

1.00

0.34

U.S.A

-0.25

-0.29

-0.06

-0.38

0.34

1.00

Source: PHD Research Bureau
 

The United States was the most severely hit economy by the recession of 2008 which impacted its growth performance for many subsequent years. Though, of late the economy is showing signs of recovery.
 

India’s growth remained steady owing to various factors including domestic demand, saving and investment rates. India’s economy is on the path to recovery and modest economic growth, thereby confirming the anticipated outcome to be true that India will surpass China in the times to come.
 

Although, India is not an export driven economy, growth in India has been fuelled more by domestic demand, incipient recovery in investment helped by stronger confidence and reduced policy uncertainty. Now India’s resilient consumer spending is an advantage as demand decelerates almost everywhere else. It is luring companies to produce in India.
 

Going ahead even though India’s and China’ s business models are highly synchronized, India’s growth is projected to surpass China on account of India’s policy reforms and macroeconomic environment that has improved on account of the central and state governments’ liberalization of labour and environmental regulations, coupled with generous reforms and new incentives for investment.
 

ENDS.

Koteshwar Prasad Dobhal
Consultant (PR)