We are in the last week of the year and it’s a time when most of us start to think about the new year and the prospects it holds for us. In this piece, we try to extrapolate from the economic-political trends and issues that the world is grappling with right now and try to hold a glass prism for what 2013 bodes for us.
Let me start with India’s economic forecast, especially output growth, which is likely to be less than 6% in the coming year. Domestically, we used to crow only two years back that we had successfully avoided the financial crash of 2008-2009 and that our GDP growth rate was north of 8%, which compared extremely well with that of the global average of less than 2%. Since then, our economic health has deteriorated with a spate of high-profile scams denting economic sanguinity. As far as global output growth is concerned, in 2012 it averaged only slightly more than 2% and is likely to stay sluggish in 2013. This is because economic troubles are evident in the mature economies of Europe, which are back in recession, and the United States, which is experiencing an anaemic economic recovery. The risk in 2013 is that these economic troubles could be mutually reinforcing, thereby making even a 6% GDP growth for India look optimistic in retrospect.
One issue that could strain the struggling global economy is the approaching fiscal cliff in the US. The White House and the US House of Representatives still have time to cut a deal to avert the cliff. But if they don’t, the result would be to put considerable downward pressure on the US economy, and, in turn, the global economy. And even if Washington avoids going over the fiscal cliff, it is unlikely to solve its fiscal problems entirely.
Politically, on the domestic front, there seems to be general discontentment with the UPA government. The spontaneous outpouring of the youth to protest and demonstrate in the wake of the gang rape of a medical student in the national capital, isn’t just about demanding justice for the victim and her family. The outrage by the diverse sections of the society, who poured into the streets of even unadventurous cities like Allahabad and Mysore, is symptomatic of the general discontentment with the governance deficit of the UPA regime. And now with Narendra Modi scoring an emphatic victory in Gujarat