The year 2016 started with a negative growth prospective for the Indian market, and the wisdom behind “India is immune to Chinese slowdown” felt flat on Monday.
Many experts believe (to some extent it’s true) India is an exception to global economic crises at least among emerging economies. And the rationales behind this thinking are: improving current account balances; low oil and commodity prices; and consumption based economy. But on Monday, all these logic looked disarray when Indian market response to Chinese market falling of 7% – resulted into slowdown too. On Monday, European to Japanese stock market all saw a negative trajectory and currencies further trembled.
What happened now?
- The biggest impact of Chinese slowdown is on the commodities, which have already weak for almost last two years.
- Prices of industrial metals like Aluminum and Copper fell by 2% on Monday.
- Crude oil and gold prices rose due to entirely different reasons – oil prices strengthened by 1.45% because the fresh dispute between Saudi Arabia and Iran while gold prices rose by 1.22% due to investors looking for safe heaven investments.
- In India, local markets fell by 2% and the Indian currency by 1% plunged further against the dollar.
It’s true that consumption-based economy has not been hit much by Federal Bank’s policy but Chinese economy moving from export-based economy to consumption based, will surely have a effect on Indian economy.