Over the past couple of days I have noticed a lot of posts on the FT’s emerging markets blog about a growth slowdown in India that is occurring as a direct result of the worsening outlook in Europe.
In one piece, the FT reported that Indian auto sales are getting crushed, down 4.2% year-on-year.
“Inflation rates were always high, lending rates were always high but it was all okay because… wage inflation was always higher than economic inflation… Now the problem is that the rate of inflation is higher,” he told beyondbrics. “All the indications are that Indian industry could go down to a slowdown. If that happens they can’t maintain that double digit wage inflation and that is a worry and is spooking people, so people are being more cautious with their spending.”
In another piece, Moody’s downgraded the Indian banking sector citing an increase in bad debts as India slows due to rising rates and inflation. Asset quality is going to worsen.
Today, the FT wrote that Tata Steel was getting hit as well:
“It’s been pretty tough [for Tata Steel Europe]; the situation within Europe has never come back to the level of activities pre-financial crisis – the slowdown in demand has put pressure on the margins for this company,” said Sanjay Jain, analyst at Motilal Oswal.
I think this points to a lack of de-coupling and demonstrates we should expect slower growth in Europe and North America to have negative feedback in the emerging markets, not just in Asia but EMEA and Latam emerging markets as well.