'India to be star performer; Dragon to slow down in 2016'

India will be a "star performer" among emerging market economies and is expected to clock 7.7 per cent growth in 2016, outshining China for the second consecutive year, a PwC report says.

According to the global consultancy firm, of the emerging economies, only India is expected to grow faster in 2016 than its long-term average growth rate.

Among the seven emerging economies (China, India, Brazil, Mexico, Russia, Indonesia and Turkey), India will be a "star performer", while the Brazilian and Russian economies will contract and China will slow down, the report said.

"For the second year in a row, we expect India to grow faster than China, expanding by around 7.7 per cent in real terms," it said.

While the G7 economies (the US, the UK, Japan, Germany, France, Italy and Canada) are expected to grow at fastest rate since 2010, led by the first two, the E7 emerging economies will grow slower than their trend rate (but still faster than the G7).

"We expect the US recovery to switch into a higher gear in 2016, while the UK will also enjoy continued consumer-led growth. We should also see at least the beginning of the end of the Eurozone crisis. The once-mighty BRICs, however, will have another tough year in 2016, with the notable exception of India," PwC UK Chief Economist John Hawksworth said.

According to PwC, the Chinese GDP growth will ease to 6.5 per cent in 2016, as growth in manufacturing and exports will continue to slow gradually.

The report further noted that India will continue to reap the benefits of recent reforms.

"The cut in the policy rate by the Reserve Bank of India from 8 per cent to 6.75 per cent last year will help support consumption and investment growth this year," PwC said, adding that FDI in the country's "underdeveloped" manufacturing sector should also pick up as foreign investment caps have mostly been lifted.

Geopolitics, rather than economics, will be at the top of policymakers' agendas, the report noted.
The migrant crisis in Europe, the response of the international community to the crisis in the Middle East and the referendum on the fate of the UK's membership of the European Union, will be the three major geopolitical issues to dominate the news headlines.

Meanwhile, commodity prices are expected to remain lower for longer.

"This will be a good news for most businesses, households and policymakers in commodity importing economies, but a challenge for countries that rely heavily on commodity exports," the PwC report added.