Economic policymakers must look west – editorialpublishers
India’s economy has been caught in a prolonged slowdown, with GDP growth falling for six consecutive quarters. Although the DECEMBER quarter’s GDP figures have not yet been released, the economy has been showing some early signs of recovery. The index of purchasing managers for both manufacturing and services in December has shown improvement. The GST was collected more than Rs 1 lakh crore for the second consecutive time in December.
Even though this fledgling recovery is underway, external headwinds in the global economy could jeopardize it. A U.S. drone strike, which has killed Qasem Soleimani, a high-government Iranian general, has made West Asia more unstable. As this is also the world’s largest oil-producing region, crude oil prices have risen by $3.8/barrel in the past two days. This has also frightened financial markets, with BSE Sensex falling by 1.9% on Monday. If West Asia slips into military conflict, it will negatively affect the Indian economy through higher oil prices, weaker rupee and pressure on remittances, which more than eight million Indians working in the regions return. Economic policymakers will do well to keep a close eye on the external situation.