The country’s economic and financial indicators made it the top performer among the largest emerging markets in the first quarter of 2021. This may soon change, however, as the Union battles with the latest Covid-19 wave and a downturn in investor interest.
Hoping for a Quick Recovery
Last month, India was ranked as the top macroeconomic performer among the world’s bigger Emerging Markets (EM). Building upon a strong finish to 2020, Bharat’s post-pandemic indicators drew a picture of a nation which is pulling away from a difficult year.
The Mint ranking takes into consideration a weighted average of the country’s performance in manufacturing, export and stock market capitalisation, among others. Reaching the top of the list has been quoted as a result of a substantial GDP growth in Q4 of 2020 and a stable flow of Foreign Portfolio Investments (FPI).
The key parameters reveal a number of industries which have enjoyed particular visibility and investor trust, with Internet tech and online gambling sites such as PureWin.com as prominent examples. Believing in Bharat’s potential comes at a crucial time of hopes for a speedy recovery on all fronts – economic, social and healthcare.
With a number of high profile foreign investment vehicles backing up the Indian stock market, the rupee maintained a stable exchange rate, while. Inflation also remained largely contained in the first Quarter of 2021.
These numbers fail to account for what China reported as its GDP in Q1 of 2021. An incredible 18% annual growth will probably not be matched by any other EM competitor.
Downturn on the Horizon?
The biggest threat to India’s post-Covid recovery and economic growth is the pandemic itself, sweeping Bharat in a new wave this spring. A dynamic investment climate has already seen some foreign funds pull out of certain volatile investments. A net selling trend was tentatively reported in April of this year, for the first time in over 6 months.
The situation resembles what happened to India’s economic performance in early 2020. As the global pandemic largely surprised both mature and emerging markets, indicators went down in a spectacular manner during last spring’s lockdown.
External funding is diffident in nature, and many foreign investors took only a few weeks to re-evaluate their positions in India. Hopes of a quick vaccination campaign are nowhere near a reality and the current health crisis is threatening to rapidly ruin the nation’s economic achievements of the past few months.
Monitoring the Pandemic
India remains a hugely attractive market in almost any economic segment. However, it seems to have been hit severely by the current Covid-19 wave, much worse than most of its EM counterparts (with Brazil a possible unfortunate exception).
With a new series of lockdowns imposed across the nation, many seasonal and unskilled workers have migrated to safer or more familiar regions. Bigger and richer cities have not been spared by this trend and the high mortality rate could drive many others away.
Communities, local businesses and foreign investors are all waiting for a number of indicators to certify when India would finally pull itself out of this situation. Ultimately, managing the pandemic without a higher vaccine coverage and mass adherence seems practically impossible.
India, the world’s biggest vaccine producer, needs to step up internal supply and administering. This would provide credible support to the Bharat’s own economic sustainability. Recent macroeconomic performance and investment behaviour have proven that many foreign investment funds are merely waiting for the right numbers to pick up again.
