India continues to grow faster than its South Asian neighbors. It is expanding about two percentage points quicker than the average emerging-market economy. This information comes from the World Bank Chief Economist for Asia, Franziska Ohnsorge. The Bank has raised its growth forecast for India to 6.6% for FY27, up from 6.5% in January. This change is based on strong first-quarter data. However, Ohnsorge mentioned that India's ability to benefit from changing global supply chains is still uncertain. In contrast, Vietnam and Cambodia have seen clearer gains, with exports rising by 17% and 14.6%, respectively.
Key Details
India's merchandise exports grew slightly by 0.86% to $441.45 billion in FY26. This is an increase from $437.70 billion in FY25. This growth is small compared to Vietnam's exports, which reached $475.04 billion. Ohnsorge highlighted that intra-regional trade in South Asia is very low, at just 0.7% of GDP. This is much lower than the 3% seen in Latin America and the Caribbean. She noted that this issue goes beyond just regional trade dynamics.
Background
In July, India held the top position among emerging markets, according to Mint's Emerging Markets Tracker. The country scored 77.3, ahead of Vietnam's 73.2 and Malaysia's 73.1. Despite a strong GDP growth of 7.8% in the January-March quarter, forecasts predict a possible slowdown to around 7.0-7.3%. This slowdown could be due to external factors, including the conflict in West Asia. The manufacturing PMI fell to 53.5 in July, while inflation increased to 4.5% from 4.4%.
These mixed economic signals may affect investor sentiment, especially in sectors that rely on export performance and inflation rates. The depreciation of the Indian rupee could also impact foreign investment flows. Investors will be looking for upcoming GDP data, expected later this week, to assess the economy's direction amid these challenges.
Based on reporting by: livemint.com