Asia’s third-largest economy expanded by just 4.4 per cent compared with the same period in the previous year, from 4.8 per cent in the preceding three months. The figure was well below expectations and its worst performance since 2009, raising fresh doubts about government assurances that growth would pick up again later this year.
All see this from Bloomberg and Reuters.
However, India's real problem is that its growth model is no longer competitive, meaning the country must reallocate labor:
Structural problems were inherent in India’s unusual model of economic
development, which relied on a limited pool of skilled labor rather than
an abundant supply of cheap, unskilled, semiliterate labor. This meant
that India specialized in call centers, writing software for European
companies and providing back-office services for American health
insurers and law firms and the like, rather than in a manufacturing
model. Other economies that have developed successfully — Taiwan,
Singapore, South Korea and China — relied in their early years on
manufacturing, which provided more jobs for the poor.
Two decades of double-digit growth in pay for skilled labor have caused
wages to rise and have chipped away at India’s competitive advantage.
Countries like the Philippines have emerged as attractive alternatives
for outsourcing. India’s higher-education system is not generating
enough talent to meet the demand for higher skills. Worst of all, India
is failing to make full use of the estimated one million low-skilled
workers who enter the job market every month.
Manufacturing requires transparent rules and reliable infrastructure.
India is deficient in both. High-profile scandals over the allocation of
mobile broadband spectrum, coal and land have undermined confidence in
the government. If land cannot be easily acquired and coal supplies
easily guaranteed, the private sector will shy away from investing in
the power grid. Irregular electricity holds back investments in
factories.
India’s panoply of regulations, including inflexible labor laws,
discourages companies from expanding. As they grow, large Indian
businesses prefer to substitute machines for unskilled labor. During
China’s three-decade boom (1978-2010), manufacturing accounted for about
34 percent of China’s economy. In India, this number peaked at 17
percent in 1995 and is now around 14 percent.
Let's take a look at the Indian ETF:
Indian prices are near their lowest level in over 1 1/2 years. Prices started dropping hard in early May, falling through the 200 day EMA. Since then, we've seen two attempted rallies that fell short. Prices moved through the 45-46 level (a key technical support area) earlier this month.
The underlying technicals for this chart are very bearish. Prices have dragged the shorter EMAs below the 200 day EMA, the MACD is negative and declining, the CMF is negative and volatility is increasing.
