With all the economic indicators in India showing decline, there has been growing concern over the slow growth which has been recorded at the lowest level in the recent past. But, it looks like a global phenomenon, as this slackness growth has inflicted almost all countries in the world, including China.
China's growth rate slowed for a sixth successive quarter to its slackest pace in more than three years, highlighting the need for more policy vigilance from Beijing even as signs emerge that action taken so far is beginning to stabilise the economy.
Year-on-year growth of 7.6 percent in the second quarter was whisker above the Government's official 7.5 percent full year target and dragged the first half average down to 7.8 percent- below the 8 percent level that in previous downturns has triggered a robust response from policymakers. The GDP number, released in a flurry of Chinese data was roughly in line with investor expectations.
The trajectory of the economy is crucial for money managers facing a slowdown not only in China, the worlds second largest economy, but anaemic growth across the BRIC grouping of major emerging economies Brazil, Russia, India and china which combine as the biggest marginal generators of global growth.
"I would say probably the worst is over and we are going to see some stabilisation and even improvement in growth in the next quarter," Sun Junwei, China economist at HSBC in Beijing said, citing improvement in quarter-on-quarter growth and broad stability in June data for fixed asset investment, industrial production and retail sales. "It pretty much depends on what will be the strength of further easing, but I think the chance is good that (policymakers) are willing to respond to this growth slowdown."
Beijing's response to the slowdown so far, sticking rigidity to a mantra of fine-tuning and a series of tweaks to monetary and fiscal policy over the last eight months, has left the economy on track for its slowest full year of growth since 1999, raising the risk for some investors that the Government is behind the policy curve.
Two cuts to benchmark interest rates in the space of a month and liberalisation moves that permit discounts to borrowing costs of up to 30 percent more, as signs to others that policy makers will do all they can to underwrite growth. Sheng Laiyun, spokesman at China's statistics bureau, said the data signalled that the economy was stabilising in Q2 and that growth in the first half was in line with expectations. The Q2 forecast in the benchmark Reuters poll was 7.6 percent.
Financial markets took the data in their stride, with Hong Kong shares gaining slightly on relief that it wasn't any worse, a sentiment echoed among oil traders who nudges Brent crude oil down a touch, while the China- sensitive Australian dollar edged up from session lows.