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Against the backdrop of concern on global growth, India and China are expected to remain the fastest growing emerging markets. India is estimated to grow at 6.8 per cent in FY13 and China is expected to grow at 8.6 per cent in 2012, says a report from Bank of America Merrill Lynch.
India is expected to do relatively well in terms of growth, since the monetary policy has begun to ease on account of inflation peaking out and because of strong domestic demand.
Trade links to expand
Trade links between India and China are expected to expand. Bilateral trade has already increased to $74 billion in 2011 from $ 18.7 billion in 2005. This has been driven by import demand originating from these two countries.
If there is a European crisis or a double-dip recession in the US, China is expected to grow at eight per cent and India to manage a growth of 5.8 per cent, said economists at BoAML.
Both the countries are armed with policy ammunition to counter the downside of growth. The People's Bank of China and the RBI had tightened interest rates the most among the BRIC countries.
Also, both the “central banks can unwind their monetary tightening to support domestic demand, especially if a global recession pulls down commodity prices,” said the report.
priya.s@thehindu.co.in
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