SLOWDOWN IN CHINA – LEARNING FOR INDIAN ECONOMY

As in the past few days, there is news of how China’s economy is facing many problems and there is a drastic slowdown in the economy. There are many things that India should understand from this economic slowdown and take action to protect India’s economy. China’s economy, the second largest in the world, has faced so many problems that India’s growing economy should take some precautions to overcome these problems.

Major reasons for the slowdown

  1. The approach of ‘Zero- Covid’ has a major impact on the slowdown of the economy.
  2. Irresponsibly doing investment on Development of Infrastructure
  3. ‘One Child Policy’ has affected the economy as there is no young population
  4. Debt Growth leads to Overvalued Currency
  5. Real Estate Sector Crisis- Due to huge Debt
  6. Coal Sector leads to power supply disruptions
  7. Decrease in Steel Demand

CHINA

Source: fijisun.com

There has been a slowdown in the Chinese economy. In 2010, the growth rate was 10.6% but now the growth rate in 2020 has come down to 2.3%. The China’s economy was mostly depended on the low-cost machinery exports. In China there has been an unexpected slash in the interest rate. There was a slowdown in the Industrial production as well. There is a drastic effect on the real estate, businesses due to this slowdown in China. Retail sales, investment and Industrial production are all slowing down because of which there is increase in the unemployment rate for young workers. There is a prediction that there is an Impact on China’s Domestic Economy as well as to their trading partners. There has been an effect on the Housing Sector as well.

India has faced loss in imports due to the slowdown of China. There is huge trade deficit which has a negative impact on India. There is also an impact on the automobile components, smartphones, pharmaceutical and other chemicals. There have been positive effects as well, such as it is a golden opportunity for India in the field of exports.

  • India having the major millennium population should use the population in an optimum manner. The demographic dividend is the greatest gift for Indian economy and this should be used to a larger scale.
  • India should not be involved in taking too much of debt. It can be learnt from the fact that taking excessive debt can put pressures on the economy in terms of increased finance cost. This can lead to larger portion of the earnings being expended in the form of interest.
  • India should be ready for all the Industrial Problems. China’s trade dispute with US has increased to the new height and this should be well dealt by Indian economy.
  • India should maintain good relations with the other countries.
  • India should have alternative energy resources.
  • India should encourage new technologies and encourage startups.
  • Due to Slowdown in China, India can take the advantage in Manufacturing Hubs. Earlier, Chinese economy was considered to be the major hub for manufacturing firms, now due to economic slowdown; India can be seen as the next destination for investment in manufacturing hub.
  • Best Opportunity to make major trade deals with other countries.

Shreya Shetty
I MBA, DSCE

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