The HSBC Emerging Markets Index (EMI), a monthly indicator derived from Purchasing Managers’ Index surveys, stood at 51.7 in July, down from 52.3 in June, indicating slower output growth across global emerging markets.
“Emerging market economic growth remains disappointingly feeble, especially when compared to the impressive upturn currently being seen in the developed world,” Markit Chief Economist Chris Williamson said. The pace of economic growth in the developed world accelerated in July to its fastest since May 2007.
During July, the HSBC composite index for India, which maps both manufacturing and services, stood at 53.0, whereas for China it was 51.6, Brazil (49.3) and Russia (51.3). An index measure of above 50 indicates expansion. Going forward, the pace of growth in emerging market economies is likely to remain week, the report added.
“With global uncertainty and risk aversion being heightened by the Argentine default, the fighting in Gaza and worries about the possibility of an escalating situation in Ukraine, emerging market economic growth looks more likely to deteriorate than improve in coming months,” Williamson said.
Of the four largest emerging economies, Brazil posted the strongest output expectations in July, followed by India.
Economy may recover
Japanese brokerage house, Nomura said India has reached an “inflection point” and the economy is likely to recover in 2015. “From a medium-term perspective, India, to us, seems to be at an inflection point.
“As a house, we were quite concerned on the macro situation from the last two-three years, but there are number of factors that are falling in place which suggest that we are at the starting point of the more medium-term pick up on the growth front,” Nomura Financial Advisory and Securities economist Sonal Varma said.
She said that one of the reasons for the country to be at an inflection point is that there is a greater confidence that the macro economic system is becoming much more stable. “At the bottom of the business cycle, we have both monetary and fiscal policies which are tight. As a result of which consumption demand is a bit weaker and simultaneously you have a government which is pushing investments so as to boost productivity,” Varma said.
Nomura believes that slowdown in the country’s growth cycle has come to an end and GDP growth is likely to rise from 4.5 per cent in 2013 to 4.7 per cent in 2014 and 6.3 per cent in 2015.