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India’s position slipped among key emerging markets in December, the latest update of Mint’s Emerging Markets Tracker shows. India ranked fifth among the ten markets considered by the tracker in December, behind China, Brazil, Indonesia, and the Philippines. It was at the third position in November, behind the Philippines and China.

Mint’s Emerging Markets Tracker, launched four months ago to track seven high-frequency indicators across 10 large emerging markets, helps us make sense of India’s relative position in the emerging markets league tables. The seven indicators considered in Mint’s Emerging Markets Tracker encompass both real activity indicators (such as PMI manufacturing and real gross domestic product or GDP growth) as well as financial metrics (such as exchange rate movements and changes in the stock market capitalization). The final rankings are based on a composite score, which gives equal weights to each of the seven indicators.

Slowing growth, rising inflation, and a relatively muted stock market performance contributed in large part to the fall in India’s rankings in December.

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India’s officially recorded growth figure of 4.5 percent in the September-ended quarter places it among the better performers in the emerging markets club but it is certainly not among the best growth performers. China, Indonesia, and the Philippines recorded higher gross domestic product (GDP) growth than India over the same period while Malaysia’s growth nearly matched India’s.

India’s policymakers have long blamed the global slowdown for India’s growth woes but now other economies are growing faster, and India seems to be responsible for the International Monetary Fund’s (IMF’s) cutbacks in growth projections for the coming years in its latest report on global economic outlook.

India’s manufacturing activity, as recorded by the purchasing managers’ index (PMI), however continues to be strong, and India continues to remain one of the few economies where the PMI score suggests an expansion in manufacturing activity.

The selection of the emerging markets in Mint’s Emerging Markets Tracker is based on the IMF classification of emerging and developing economies. The 10 emerging markets selected were the largest economies in this group for which consistent and comparable time series data were available.

The latest spike in India’s consumer inflation numbers makes it the second-worst emerging market in this group, just behind crisis-ridden Turkey. If inflation continues to flare up, this could impact India’s macro-economic stability and its attractiveness among emerging markets in the months ahead. The spurt in inflation comes amid a slump in demand, indicating inefficiencies caused by structural bottlenecks in the economy.

The lack of structural reforms and India’s lurch towards protectionism has meant that India’s export growth remains lacklustre even while China is able to grow its exports amid a trade war directed against it. Several other peers fared worse than India in export performance but this is partly driven by a base effect, as some of these economies had witnessed considerable export growth in the year-ago period.

India’s financial market indicators were relatively subdued in December. The rupee remained relatively weak and India’s stock market capitalization rose less than most peers as foreign investors largely stayed away from the Indian markets.

All eyes will now be on the upcoming budget and the impact it will have on growth and macro-economic stability.

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