A clutch of investment banks, including Nomura and Barclays, recently lowered expectations of China’s growth. Media reports say the gloomiest forecast came from Nomura which does not rule out the Asian giant’s output growth falling below 6 percent next year.
The probability of a hard landing in China may be beneficial to India if it manages its economy and currency slightly better. Chinese demand over the past decade fuelled a rally in global commodity prices such as those of metals and oil. Those are now coming off as its economy slows. For instance, some expect oil prices to even drop to $70 a barrel, which bodes well for India.
But the recent fall in the value of the rupee has eroded any gains from lower oil prices. If the government is able to stop the erosion, it may be able to take advantage of the dipping prices, thus easing the pressure on the trade balance.
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(This story appears in the 23 August, 2013 issue of Forbes India. To visit our Archives, click here.)