Consulting club presents'The Indian Economic Outlook'


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Consulting club presents'The Indian Economic Outlook'

  1. 1. Indian Economic Outlook by Consulting Club, SCMHRD
  2. 2. Global Competitiveness Index Basic requirements sub index Pillar 1: Institutions Pillar 2: Infrastructure Pillar 3: Macroeconomic environment Pillar 4: Health and primary education Pillar 5: Higher education and training Pillar 6: Goods market efficiency Pillar 7: Labour market efficiency Pillar 8: Financial market development Pillar 9: Technological readiness Pillar 10 : Market size Efficiency enhancers sub index Pillar 11: Business sophistication Pillar 12: Innovation Innovation and sophistication factors sub index Key for factor-driven economies Key for Efficiency-driven economies Key for innovation-driven economies Source : Global Competitiveness Report 2012-13 Di idi g the o ld s e o o ies
  3. 3. Rank out of 144 Score (1-7) GCI 2012–2013 59 4.3 GCI 2011–2012 (out of 142) 56 4.3 GCI 2010–2011 (out of 139) 51 4.3 Basic requirements (60.0%) 85 4.3 Institutions 70 3.9 Infrastructure 84 3.6 Macroeconomic environment 99 4.3 Health and primary education 101 5.3 Efficiency enhancers (35.0%) 39 4.5 Higher education and training 86 4 Goods market efficiency 75 4.2 Labor market efficiency 82 4.2 Financial market development 21 4.9 Technological readiness 96 3.4 Market size 3 6.2 Innovation and sophistication factors (5.0%) 43 3.9 Business sophistication 40 4.3 Innovation 41 3.6 Source : Global Competitiveness Report 2012-13 Measu i g I dia s Fa to D i e e o o
  4. 4. Economic Indicators Govt. Bond yield (10 yr) 8.63% Currency 65.25 Stock market (index pts.) 19270.06 GDP (USD bn) 1841.7 Growth rate (annual) 4.4.% GDP Per capita (USD) 1106.8 Inflation rate (WPI) 5.59% Foreign exchange reserves (INR bn) 15551.4 Interbank rate 12.25% Current account to GDP -4.8% • The economy of India is the 10th -largest in the world by nominal GDP and the 3rd -largest by purchasing power parity (PPP) • The country is one of the G-20 major economies and a member of BRICS • On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP (PPP) in 2012, according to the IMF • India is the 19th-largest exporter and the 10th-largest importer in the world • India's GDP grew by 9.3% in 2010–11; thus, the growth rate has nearly halved in just three years to be at 4.4% in the current quarter • On August 28, 2013 rupee hit an all time low of 68.80 against US dollar • Services are the highest contributor to GDP (65%), followed by Industry (27%), and Agriculture(8%) • Main industries are: textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, pharmaceuticals Indian Economy at a glance Source : Indian is the 10th largest economy in the world by GDP
  5. 5. Indian Economy at a Glance --- Gross Domestic Product 4 5 6 7 8 9 10 FY2009 FY2010 FY2011 FY2012 FY2013 GDP GROWTH RATE GDP GROWTH RATE GDP growth rate of 7.2%  Since the global financial crisis of 2008-09, the Indian economy grew to a healthy 8.6% till 2010-11.  Since then, growth started declining. The trend continued in 2012-13 with a disappointing growth rate of 5.4% in the first half, resulting in lowering of expectations.  The se o d ua te s g o th at . % is o e of the lo est quarterly growth rates seen in the last decade and the annual growth of 5% will be the lowest since 2002-03. Agriculture 13% Industries 26%Service 61% PERCENTAGE OF GDP Contribution of Different Sector to GPD Source : Indian Economy is Driven by Domestic Consumption Exports 23% Domestic 77% PERCENTAGE OF GDP FY 2014 (expected)
  6. 6. Indian Economy at a Glance –Sector wise Growth Rate of Different Sector  Indian Economy consists of 3 major Sectors – Agriculture , Industry and Service  Historically the growth in the service sector has been the highest.  E o o s depe de e o slo l g o i g ag i ultu e se to has been reduced to 13%  Due to economic slowdown the Growth of industrial sector has been reduced to 0.2%, which is expected to recover soon. 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% Growth Rate Agriculture Industry Service Overall 6
  7. 7. A micro view at the major sectors – Agriculture After an impressive growth of 7.9% in 2010-11, agricultural growth rate declined to 3.6% in 2011-12 and further dipped to 1.8% in 2012- 13. The agriculture sector in India is largely monsoon dependent. This downfall is primarily attributable to the delayed and deficient rainfall. Te h ologi al gai s i ag i ultu e a d fa e s espo se to ette i f ast u tu e is e pe ted to positi el affe t pe fo a e of this sector in the coming years. A dedicated Sub-Mission on Agricultural Mechanization has been proposed for the 12th Plan which includes custom- hiring facilities for agricultural machinery as one of its major components. The agricultural sector, despite accounting for less than 15% of GDP, plays an important role in the economy considering its more than 50% share of employment. The ag i ultu e, fo est a d fishi g se to is likely to show a growth of 1.8 per cent in its GDP during 2012- , as agai st the p e ious ea s growth rate of 3.6 %. -2 0 2 4 6 8 10 Total economy Agriculture, forestry & fishing Agriculture Inc. Livestock Fishing 2007-08 2008-09 2009-10 2010-11 2011-12 Source : IBEF
  8. 8. A micro view at the major sectors - Industry The mining sector has been plagued by a policy logjam. Early resolution of these issues can provide some respite not only to the mining industry but also others such as power generation, which will in turn speed up industrial recovery. Higher lending rates, in addition to the unaddressed policy constraints will further lower investment demand, delaying a recovery in the manufacturing sector. However, even if these issues are resolved immediately, no significant push to growth would be felt in 2013-14 due to its lagged impact. Middle East helped in moderating domestic inflation during the year. The Index of industrial production (IIP) fell by 2.2 per cent in June as compared to a year ago. During the first quarter of 2013- 14 (April-June 2013), industrial output fell by 1.1 % year-on-year. Both mining and manufacturing contracted by 4.5 % and 1.2 % respectively. As per latest data released for GDP growth, industrial GDP (which includes construction) expanded 0.2 % in the first quarter of 2013-14 as compared to 2.7 per cent in the fourth quarter of 2012-13. Construction output expanded 2.8 % in this period. -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 2009 2010 2011 2012 2013 2014* IIP and its components growth Index of Industrial Production (IIP):Overall Index of Industrial Production : Electricity Index of Industrial Production : Manufacturing Index of Industrial Production : Mining Source: Crisil reseach
  9. 9. A micro view at the major sectors – Service -4 -2 0 2 4 6 8 10 12 2007 2008 2009 2010 2011 Overall GDP of India Overall GDP of world Services GDP of India Services GDP of World The CAGR of the services sector GDP at 10% for the period 2004-5 to 2011-12 has been higher than the 8.5% CAGR of overall GDP during the same period. However in 2011-12 and 2012-13, there has also been a deceleration in growth rate of services sector at 8.2% and 6.6% respectively. A o g the ajo oad atego ies of se i es, fi a i g, i su a e, eal estate, a d usi ess se i es , hi h o ti ued to grow robustly both in 2010-11 and 2011-12 decelerated to 8.6% in 2012-13. While in 2011- g o th i t ade, hotels, a d estau a ts a d t ansport, sto age, a d o u i atio slo ed do to . % a d . % espe ti el , i - t ade, hotels, a d estau a ts a d t a spo t, sto age, a d o u i atio o i ed g e a esti ated . %. I dia s se i es g o th has ee o siste tl a o e its o e all growth in the last decade except for 2003. The share of services in I dia s GDP at fa to ost i eased f o . % i -1 to 56.5 % in 2012-13 as per Advance Estimates . • Including construction, the share would increase to 64.8% in 2012-13. • With an 18% share, trade, hotels, and restaurants as a group is the largest contributor to GDP among the various services sub- sectors, followed by financing, insurance, real estate, and business services with a 16.6% share. • Community, social, and personal services with a share of 14%is in third place. • Construction, a borderline services inclusion, is at 4th place with an 8.2% share. Source : IBEF
  10. 10. A micro view at other growing sectors Banking and IT Telecom HealthInfrastructure  I dia s Rs 77 trillion (US$ 1.30 trillion)-banking industry is well at par with global standards and norms.  The country has 87 scheduled commercial banks with deposits worth Rs.71.6 trillion (US$ 1.21 trillion) as on 31 May, 2013.  Indian banking and securities companies will spend around US$ 422 billion on IT products and services in 2013. That will imply a 13 per cent rise from Rs. 37,300 crore (US$ 6.31 billion) spent in 2012. I  T services is the largest overall spending category at Rs 13,200 crore (US$ 2.23 billion) in 2013. This ensures that IT service providers lay a strong focus on the financial services sector, according to a study by research and analyst firm Gartner. Goi g ith the esti ates that Asia s thi d la gest e o o ill e o e the o ld s thi d la gest ; a eed fo o e o ust a d ast i f ast u tu e is inevitable. Spanning from roadways to airways, ports to airports and power production facilities, Indian infrastructure segment is the thrust for the development of the nation and hence liberal Government policies coupled with deliberate strategies to promote infrastructure spells great opportunities for engineering and construction (E&C) companies in India. The growth in infrastructure is expected to come on the back of a healthy growth in the freight traffic of commodities like coal, cement, iron ore for steel plants and fertilizers. The Indian healthcare industry, which comprises hospitals, medical infrastructure, medical devices, clinical trials, outsourcing, telemedicine, health insurance and medical equipment, was valued at US$ 79 billion in 2012, and is expected to reach US $160 billion by 2017.  The Indian healthcare sector is expected to grow at 15% y-o-y, because of factors like rapid growth in infrastructure development, creation of demand for higher levels of healthcare, rising awareness of users, and launch of innovative insurance, reimbursement, and financing policies.  The healthcare equipment sector attracted 8.8 % of the total investments in terms of deal value with an aggregate of US$ 249.01 million (20 deals).  The medical tourism industry in India is pegged at US$ 1 billion per annum, growing at around 18 per cent and is expected to touch US$ 2 billion by 2015. Source: India's mobile services market will touch Rs 1,200 billion in 2013, registering a growth of 8 per cent from Rs 1,100 billion in 2012.  Mobile connections are expected to grow to 770 million in 2013, an 11 % increase from 712 million connections in 2012.  Internet traffic in India is expected to reach from 393 petabytes per month in 2012 to 2.5 exabytes per month in 2017, Cisco study.  India is expected to have 130.6 mn o ile i te et use s Ma .  The mobile value-added services (MVAS) market is expected to reach US$ 9.5 billion in 2015, from US$ 4.9 billion in 2012.  The telecommunications industry attracted foreign direct investments (FDI) worth US$ 12,856 million between April 2000 to March 2013, an increase of 7 per cent to the total FDI inflows .
  11. 11. Increasing foreign debt with decreasing Reserve coverage 170000 225000 225000 262500 308333 340000 0 50000 100000 150000 200000 250000 300000 350000 400000 Jän.08 Jän.09 Jän.10 Jän.11 Jän.12 Jän.13 External Debt  The external borrowings of India have increased over the years and the debt has become more short term and therefore riskier.  Total financing needs (defined as the current-account deficit plus debt that needs rolling over) are $250 billion o e the e t ea . I dia s ese es a e $ illio , giving a coverage ratio of 1.1 times.  That has fallen sharply from over three times in 2007-08 and leaves India looking weaker than many of its peers. Source:
  12. 12. Decreasing trend of Budget Deficit and Debt to GDP ratio 7.8 6.9 5.1 5.8 4.8 4 5 6 7 8 2009 2010 2011 2012 2013 Budget Deficit Decreasing Trend of Budget Deficit  The Overall Debt to GDP of the country has been on a declining trend.  Annual Budget Deficit of the country has been decreased by 300 basis points from 7.8 to 4.8  The Overall Investment in the country has shown a zig- zag trend because of the global recession. 74.72 74.97 69.427 68.053 67.57 60 65 70 75 80 2009 2010 2011 2012 2013 Debt to GDP Ratio Decreasing Trend of Debt to GDP Total Investment as % of GDP
  13. 13. 0 1 2 3 4 5 6 7 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-20142014-20152015-20162016-2017 Fiscaldeficitasa%ofGDP Trends in Fiscal Deficit After the initial budget target of 5.1% of GDP for the fiscal deficit, the Government revised its fiscal consolidation roadmap in October 2012. As per the revised roadmap, the fiscal deficit of the central government will be reduced in a calibrated way from the new target of 5.3% of GDP in 2012-13 to 3.0% of GDP by 2016-17. Similar to the previous year. when the budgeted fiscal deficit of 4.8% actually fared at 5.7% of GDP, the fiscal deficit target for 2012-13 looks unlikely to be achieved. With lower tax collections, inability to meet divestment targets and burgeoning expenditure outgo, the Indian economy is facing considerable fiscal strain. The Government of India is looking at taking necessary steps to widen the tax base, cut excess expenditure and have a fixed divestment plan in place. A number of these measures have been implemented, which are already showing results. Source : Economic survey 2012-13
  14. 14. Current Account Deficit over the years Increasing Current Account Deficit  The Current Account Deficit and Balance of Trade shows similar trend.  The Current Account Deficit of the country has been increasing.  India has trade surplus only with US among the Top 5 country ( Total Trade  India has highest trade deficit with China 1 1.5 2 2.5 3 3.5 4 4.5 5 FY08 FY09 FY10 FY11 FY12 FY13 CAD as % of GDP Current Account Deficit and Balance of Trade Country Export Import Total Trade Trade Balance UAE 41.354 51.70 93.05 -10.34 USA 55.53 32.86 88.39 22.67 CHINA 13.58 67.60 81.19 -54.01 SAUDI ARABI 16.66 47.82 64.48 -31.15 SWITZERLAND 3.11 57.01 60.13 -53.90 Total of Top 5 countries 130.2 257.00 387.26 -126.74 India's Total 403.78 684.28 1,087.92 -280.5014
  15. 15. I dia s T ade ith Wo ld I dia s E po ts I dia s I po ts Exports Cover of India  The Overall trade of India has been on increasing trend.  The Export Cover are less than 1, since India is net importer.  Export Cover of country changed the trend during the global slowdown.  The Export Cover of the country is more or less same level as in 2009, as the total trade increased so does the deficit.  Rising gold and oil imports have led to a trade deficit of INR 733.33 billion. 15
  16. 16. Forex Reserve 200 250 300 350 400 Mär.08 Sep.08 Mär.09 Sep.09 Mär.10 Sep.10 Mär.11 Sep.11 Mär.12 Sep.12 Mär.13 Sep.13 Forex Reserve Forex Reserve Linear (Forex Reserve)  Reserve bank of the country has kept the Forex reserves around 280 – 290 billion dollars in the past five years.  I dia s I po t Co e as . Mo ths i Ma h .  Forex reserves has depleted by 7% in last Six months, due to fall of Rupee in the International Market.  ‘BI also sold its dolla ese e i o de to stop the upee s f ee fall  As the Imports of the country are increasing, and the reserves are on same level the import cover of the country has been reduced 16
  17. 17. Other Key Parameters to measure Indian economy Purchase Manger Index for Manufacturing and Service  A PMI data less than 50 is a sign of initial recession  The Service PMI has come down to 47.6 from 55.8, Feb data shows the highest PMI for the year 57.5  The Manufacturing Index has come down to 48.5 from 52.8, Jan data shows the highest PMI for the year 54.7  Industrial Production has been at desired level during early 2010 till Nov 2011.  During Last 1 year, IIP data has shown the slowdown in the economy.  The Personal saving increases during the slowdown 17 IIP Data for INDIA Personal Saving Vs Stock Market 47 48 49 50 51 52 53 54 55 56 57 58 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Manufacturing Service
  18. 18. Getti g to the oot of I dia s slo do Another consequence of the slowdown has been lower-than-targeted tax and non-tax revenues. With the subsidies bill, fiscal deficit has increased. The situation demanded reduced government spending to contain inflation.  Also required were steps to facilitate corporate and infrastructure investment to ease supply.  Several measures announced in recent months are aimed at restoring the fiscal health of the government and shrinking the CAD as also improving the growth rate.  With the global economy also likely to recover in 2013, these measures should help in improving the Indian economy's outlook for 2013-14. 18 Inflation Rate • The headline inflation rate, measured by the wholesale price index (WPI), accelerated to 5.79 per cent annually in July from 4.86 per cent in June, taking it above the Reserve Bank of India's comfort zone of 4 to 5 per cent for the first time since March • Depreciating rupee is a major contributor to the growing inflation, due to the increasing price of imported oil • Inflation in India is majorly food inflation, major contributors being cereals, vegetables and fuel and power items • Despite an acute slowdown in domestic demand, the manufacturing prices have remained elevated due to rising input costs on account of massive depreciation of rupee The strong post- financial- crisis stimulus led to stronger growth in 2009-10 and 2010-11. The boost to consumptio n, coupled with supply side constraints, led to higher inflation. Monetary policy was tightened, even as external headwinds to growth increased. Falling savings without a commensur ate fall in aggregate investment have led to widening current account deficit. WPI inflation has been coming down. But food inflation, after a brief slowdown, continues to be higher than overall inflation Given the higher weightage to food in consumer price indices (CPI), CPI inflation has remained close to double digits.
  19. 19. The vicious circle – Inflation Rate and its Impact Inflation Rate  During Global slowdown, RBI kept the Interest Rates at very low level, to immune the country from slowdown.  The very low interest rates resulted in high inflation rate in the country.  To tame down the inflation rate, RBI increased the interest rate above 9%.  As the interest rate increased the economy slowed down.  And Inflation affected the growth rate, with time lag of more than 12 months Inflation Rate and Interest Rate Interest Rate and Growth Rate 19
  20. 20. Tough Times Tumbling Rupee On August 28, 2013 rupee hit an all time low of 68.80 against US dollar to be around 65 currently , 13% below its level 3 months ago. In Ma A e i a s Fede al ‘ese e hi ted that it ould soo sta t to edu e its ast purchases of Treasury bonds. As global investors adjusted to a world without ultra- cheap money, there has been a great sucking of funds from emerging markets. In the past three months, the stock market is down by a quarter in dollar terms • Reduction in purchases of Treasury bonds by US federal reserve has led to sucking of money from emerging economies • Bond yields have increased from Brazil to Thailand • Government bond yields in India have been rising • On August 20th the RBI said it would intervene to try to calm bond yields of the rupee apart from the high trade deficit. Tumbling stock market Rising bond yields 20
  21. 21.  Reserve Bank of India and other institutional bodies are relaxing the norms to increase the inflow of the money!  Due to poor performance and inefficient working of current government, there are lot of reforms pending.  New Government may bring new reforms for stability of inflow of FII  Bernanke Effect: Just after QE 3 Tapering announcement, FIIs start pulling the funds from Indian Market, which leads to 15.1% rupee depreciation till Sep 1 2013.  The Sharp Rupee depreciation reduced the gain of the foreign investor, forced him to withdraw the funds, Foreign Institution Investment - Indian Stock Market Foreign Institution Investment - Regulation  For an Individual FIIs/Sub-accounts a maximum of 10% of the total paid-up capital or 10% of the paid-up value of each series of convertible debentures issued by an Indian company  For total holdings of all FIIs/Sub-accounts a maximum of 24% of the paid up capital or paid up value of each series of convertible` debentures  Both FIIs and NRIs are not allowed to invest in any company which is engaged or proposes to engage in the following activities:  i) Business of chit fund, or  ii) Agricultural or plantation activities, or  iii) Real estate business or construction of farm houses, or  iv) Trading in Transferable Development Rights (TDRs).-10,000.00 -5,000.00 0.00 5,000.00 10,000.00 15,000.00 20,000.00 25,000.00 30,000.00 35,000.00 FII Net Investment FII Net Investment Bernanke Impact QE Tapering By US Feds FIIs – Start Pulling Funds from India Rupee Depreciation
  22. 22. Foreign Institution Investment - Indian Stock Market  Net Annualized Return is calculated to neglect the impact of rupee depreciation!  Net Annualized Return over 10 Year period is 14.03% which much higher than single digits growth other Markets  In last 5 years, the performance of Indian Market has been below, which can be attributed to the pending reforms, global slow down, increasing interest rates, poor governance  Since the Rupee is currently Trading around mid 60s, It is right time invest in the economy, as Rupee seems to be over priced ( Crisil Report).  Historically Indian Equity has performed well in long run , hence Investment should be done with long term perspective  After the General Election Next year, Things can change for Indian Economy. If the Narendra Modi Comes in Power.  It would be right approach to wait till the next year, in mean time the Rupee Volatility will also reduced. Period Sensex Return Rupee Depreciation Net Return 2 Years 8.43% 10.97% -2.54% 5 Years 8.42% 5.17% 3.25% 10 Years 15.78% 1.75% 14.03% Data till June 1,2013 is considered because of the sharp decline of the Rupee in last 3 months. All the Returns are annualized. Annualized Return on Sensex Exchange Rate Fluctuation 0.00% 5.00% 10.00% 15.00% 20.00% Over 2 Years Over 5 Years Over 10 Years Indian Stock Market DOW Jones HANG SENG INDEX Stock Market Returns Recommendation
  23. 23. Foreign Direct Investment 23 Comparison Business Confidence in India and Brazil Comparison Business Confidence in India and ChinaComparison Annual Growth Rate in India and China Comparison Annual Growth Rate in India and Brazil
  24. 24.  The Growth Rate of India has been better than the Brazil.  During last five Growth rate of Brazil has not been more than India for even single quarter  The Growth of Chinese economy is more robust than Indian Economy.  The China has grown faster than India except in 2009.  Currently the Business Confidence in Brazil is slightly better than India, During last five years, Business confidence in India has been better than Brazil for most of period.  The Business Confidence in India has been better than China, due better policies in the country. 24 Consumer Spending in India and Brazil Consumer Spending in India and China India Vs BRICS
  25. 25. Source: Capital control measures: Aug 14 On August 14 the Government introduced Capital Control Measures in response to incipient signs of capital flight. It was supposed to reduce the amount Indian residents and firms can take out of the country. capital measure included: 1. Reducing the limit for Overseas Direct Investment (ODI) under automatic route for all fresh ODI transactions, from 400% of the net worth of an Indian Party to 100% of its net worth. 2. Reducing the limit for remittances made by Resident Individuals, under the Liberalised Remittance Scheme (LRS Scheme), from USD 200,000 to USD 75,000 per financial year. 3. While current restrictions on the use of LRS for prohibited transactions, such as, margin trading and lottery would continue, use of LRS for acquisition of immovable property outside India directly or indirectly will, henceforth, not be allowed Foreign investors took fright, fearful that India might freeze their funds too, much as Malaysia did during its crisis in 1998. This led to further weakening of the rupee and deterioration of the Indian economy. Celebrated economist Raghuram Rajan was appointed as the 23rd governor of Reserve Bank of India on 5th September, succeeding D. Subbarao, creating a wave of optimism. Top seven measures were announced by RBI to boost confidence 1. New bank licenses 2. Currency measures 3. SLR reduction 4. Oversease borrowing limit for banks 5. Issuance of Inflation Indexed Savings Certificates linked to the CPI New Index 6. Priority sector lending 7. NPLs Next day, the S&P BSE Sensex reclaimed its crucial psychological level of 19000 The 50-share Nifty index also managed to hit its crucial psychological level of 5600! A ray of hope for the Indian economy: Raghuram Rajan
  26. 26. Source: But the uncertainty continues.. Big Question? • Till how long can Rajan keep the bears at bay, all because of the negative news flow on growth data? • Till the RBI policy meeting on September 20,the bullish sentiment looks certain, but then what? Upcoming centre elections • Current government to follow populist measures to attract votes for the centre elections due in 2014 • Measures like the Food Security Bill will raise government spending on food subsidies to about 1.2 percent of GDP per year from an estimated 0.8 percent currently, exacerbating the government's weak finances • Low tax collection and high subsidies will further increase the fiscal deficit Uncertainty on the economic outlook in India looms till next year elections, when the new government comes and pushes for long – term reforms which boost growth, control inflation and attract foreign investment in the country The road may be rocky in the near term, particularly for the largest deficit countries – India and Indonesia – but we don't think this is the Asian crisis all over again," said S&P report titled 'South And South-east Asian Economies Grapple With Growth And External Financing Risks'. In normal times the countries with high Current Account Deficit (CAD) and high savings do not find it difficult to borrow in the international market, and when markets become risk averse, economies with Current Account Deficits face external financing pressure. India's CAD rose to an all time high of USD 88.2 billion or 4.8 per cent of the GDP in 2012-13. For the current fiscal, the government plans to bring it down to USD 70 billion or 3.7 per cent of the GDP. High CAD is also impacting the value of rupee which slipped to an all time low of 68.75 to a dollar in the intra-day trade. Though 2014 Elections will impact the economy in a major way since the policies and steps taken will affect directly and indirectly affect the Fiscal deficit, Inflation, foreign investment s and CAD. The smaller, more open, more trade-dependent economies in Asia, such as Singapore and Hong Kong, have higher growth betas, or risks to growth. In contrast, the larger, more domestically driven economies such as China, India, Indonesia, and the Philippines have lower growth betas. The slowdown is attributed to the ongoing market turbulence largely to uncertainties around the timing of tapering (lowering bond purchases) by the US Federal Reserve and recent cuts in Asian GDP growth forecasts. However the rupee fall is a mere consequence of the above which will come back once the economy is stabilised by growth in exports and lesser dependence on imports The road ahead