The People’s Bank of China (PBOC), the central bank of the second biggest economy, has uncorked a stimulus package featuring slashing of interest rates and cash injection.
On Monday, September 30, the Indian equity market broad indices Sensex 30 and Nifty 50 dipped by 1,272.07 and 368.10 points respectively – an outcome of FPIs (Foreign Portfolio Investors) selling stocks worth Rs 9,791.93 crore and rushing to China.
Wake up call for India?
With the dragon waking up to cobble together a revival plan, the important question is, does it pose any threat for India?
Analysts are divided on opinion. More important, there is more than one perspective to look at the situation.
India reform-oriented growth engine
One perspective is to see India as a reform-oriented growth engine that will hold the attention of global investors, who have probably developed a suspicion of the Chinese government’s way of thinking.
“About $143 billion has been injected in the Chinese banking system coupled with rate cuts…; I really don’t think India is going to be impacted. India’s growth story is irreversible. India’s phenomenal growth rates are attracting investors from around the world. I think investors from around the world have realised that it not just the sinking Chinese economy but the attitude of the Chinese government which is more objectionable,” said economist Sharad Kohli.
“Indian exports will not be impacted… Some investors may turn their face away from India, but it is not going to impact India majorly,” said Kohli.
China and India vying for global investors
The other perspective is held by experts such as economist Akash Jindal. This point of view essentially rests on both countries vying for the cash chest of investors. If China’s stimulus package has its desired effect, it might go a long way in restoring the faith of investors in the Chinese economy once again, and that might impact some of the flows coming India’s way.
“China has been going through a deflation. The Chinese people didn’t have the money to buy things and economy slowed down. So the Chinese stimulus package may help China,” thinks Jindal.
“Right now India is doing much better than China. Both China and India are competing for global money. If the stimulus package helps things improve in China, it will help China get a bigger share of global money and that’s going to be negative for India,” Jindal added.
To pull out the sagging Chinese economy out of the rut, the Xi Xinping regime and China’s central bank a robust economic stimulus since the pandemic. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
