India and China are both among the fastest-growing economies in the world. Despite the global economy being in financial turmoil after China's projected lower economic growth, India is trying to project itself as a safe investment with continued economic growth. Prime Minister Narendra Modi called Indian business leaders and economists for a three-hour summit to discuss how to steer India’s economy in a positive direction after China’s slowdown was announced.
Those present at the meeting requested more investment in infrastructure, expediting government clearances, and the lowering of capital costs. In addition, others suggested that domestic companies should be further protected from inexpensive imports and that an interest-rate cut was overdue from the Indian Central Bank. Although there has been in an increase in foreign direct investment this year, a point that was made at the meeting was that local companies need to make improvements in economic management before capital spending is increased.
A change this year in the government’s method for estimating its gross domestic product has put solid growth figures at odds with signs of economic gloom. Some signs are that many corporations are reporting lethargic earnings growth and low monsoon rains suggest that crop production could be low, which may result in low household spending in rural areas. In addition, despite the attraction of low wages and a fairly untapped consumer market, India faces challenges with its unreliable electricity, uncertain regulatory environment, and congested roads and ports.
Although India has felt the turmoil in its stock and currency markets amid the recent global market turmoil, Indian officials made the case that India should be seen as a safe harbor for investments. India does not sell natural resources or manufactured goods in large quantities to China and is benefiting from the weaker yuan when it imports machinery and other equipment from China. In addition, India is a net importer of crude oil; thus, Indian firms and consumers are benefiting from the lower prices.