PWC: India to be star performer; China to slow down in 2016

India will be a “star performer” among emerging market economies and is ex-pected to clock 7.7 percent growth in 2016, outshining China for the second consecutive year, a PwC report says.

According to the global consultancy firm, of the emerging economies, only In-dia is expected to grow faster in 2016 than its long-term average growth rate.

Among the seven emerging economies (China, India, Brazil, Mexico, Russia, In-donesia and Turkey), India will be a “star performer”, while the Brazilian and Russian economies will contract and China will slow down, the report said.

“For the second year in a row, we expect India to grow faster than China, ex-panding by around 7.7 percent in real terms,” it said.

While the G7 economies (the US, the UK, Japan, Germany, France, Italy and Canada) are expected to grow at fastest rate since 2010, led by the first two, the E7 emerging economies will grow slower than their trend rate (but still faster than the G7).

“We expect the US recovery to switch into a higher gear in 2016, while the UK will also enjoy continued consumer-led growth. We should also see at least the beginning of the end of the Eurozone crisis. The once-mighty BRICs, however, will have another tough year in 2016, with the notable exception of India,” PwC UK Chief Economist Mr. John Hawksworth said.

According to PwC, the Chinese GDP growth will ease to 6.5 percent in 2016, as growth in manufacturing and exports will continue to slow gradually. The re-port further noted that India will continue to reap the benefits of recent re-forms.

“The cut in the policy rate by the Reserve Bank of India from 8 percent to 6.75 percent last year will help support consumption and investment growth this year,” PwC said, adding that FDI in the country’s “underdeveloped” manufac-turing sector should also pick up as foreign investment caps have mostly been lifted.

Geopolitics, rather than economics, will be at the top of policymakers’ agendas, the report noted.
The migrant crisis in Europe, the response of the in-ternational community to the crisis in the Middle East and the referendum on the fate of the UK’s membership of the European Union, will be the three major geopolitical issues to dominate the news head-lines.

Meanwhile, commodity prices are expected to re-main lower for longer.
“This will be a good news for most businesses, house-holds and policymakers in commodity importing economies, but a challenge for countries that rely heavily on commodity exports,” the PwC report added.

(Source – The Financial Times, 10-January-2016)