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India: 2019 could be a turning point for the economy



But the Indian Prime Minister faces a grueling election campaign next year while questions arise about his handling of a weakened economy in recent months.

The Indian economy rose in the first half of 2018, having recovered much of the previous year from a tax overhaul and a shock decision by Modi to ban most of the country's money.

Growth accelerated in the quarter to the end of June 2018 to 8.2%, the fastest growth rate of all major economies. India still maintains this distinction, but growth fell sharply to 7.1% in the last quarter.

GDP data for the last quarter of 2018 are expected in February and could consider Modi's appeal to voters as he seeks a second term as Prime Minister.

Voters will also consider the efforts of modes to create jobs. About 1
2 million Indians enter the workforce every year, but many find it difficult to find a job. India does not publish official employment data, but a recent study by Azim Premji University researchers concluded that "an increase in unemployment is clearly visible across India".

Rupee Problem

The Indian Rupee reached a series of record lows in 2018 and is one of Asia's worst rated currencies. Despite a slight recovery towards the end of the year, it still fell by around 10% against the US dollar in 2018.

The currency will continue to weaken next year due to political uncertainties surrounding the elections and concerns about India's independence, the central bank, Capital Economics analysts recently wrote.

  Prime Minister Narendra Modi.

. Turbulence at the top bank

The darkest cloud in India The economic horizon concerns the central bank, the Reserve Bank of India.

Former central bank chief Urjit Patel abruptly stepped down in early December – nine months before his term expired. While Patel quit on personal grounds, his departure was preceded by public speculation between the central bank and the government of Modi.

The government has reportedly urged the bank to do more to boost pre-election growth, and analysts told CNN that Patel was likely "unable to withstand" this pressure.

Modi did not waste time replacing Patel. He appointed Shaktikanta Das, a former government official, as his successor barely 24 hours later.

  India's hasty appointment of central banks is a risky move.

The & # 39; hasty The convocation and its government balance sheet have raised concerns that the central bank's autonomy may be jeopardized.

His appointment "is likely to keep investors and markets worried about RBI independence, given their close ties with the government," said Priyanka Kishore, senior economist at Oxford Economics.

Kishore and other analysts predict the central bank. If interest rates have been raised twice in 2018 and have remained constant since then, they will decrease in 2019.

What happens next?

Many of the reforms proposed by Modi, especially with regard to India's land acquisition and labor laws, have not yet materialized.

The major overhauls he has made, such as changes to the tax system and cash ban, have deeply disrupted the economy.

Next year's elections could give a different picture.

"An election victory for Prime Minister Modi could provide room for revitalizing his reform agenda after a lackluster 2018," said Shilan Shah, senior Indian economist at Capital Economics.

Modes may seek to reduce bureaucracy and further open India to foreign investment, Shah said. Another push to privatize state-owned companies is likely.

Other traditional pressures on the Indian economy, such as high oil prices, have slowed in recent months. As one of the largest energy importers in the world, another increase could hit India hard.

What happens in the polls will have a big impact on India's economic health.

"The election is likely to turn out to be a turning point for the economy," Shah said.


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