Although IDFC had been predicting a slowdown for India in 2019, its severity exceeded expectations. In 4Q, nominal GDP growth was nearly half what it was a year prior. In part, this was due to India's economic performance being relatively weaker than that of its global peers. Whilst Chinese growth has slowed, Choudhary argues that this has precipitated a focus towards long-term sustainable growth. The prospect of a successful end – or at least pause – to the US-China trade war also seems to be buoying global sentiment.
Although a range of stimulus tools have been used to buoy the global economy, Choudhary argues that their effectiveness will continue to decline.
“The point for us is that the world is unlikely to provide an impactful stimulus that could serve as a meaningful global tailwind to India’s domestic growth.”
India, meanwhile has been wracked by domestic idiosyncrasies. For years, stagnating income growth had had little impact on consumption, largely due to a high-level of household leverage. But the collapse of a number of prominent Indian shadow banks has sparked a credit squeeze, undermining the lending that had fueled the economy for so long.