Industry Odisha Bureau, Aug 25: India held onto its number one spot among emerging economies in July, marking a third straight month at the summit of (Source:-Mint’s Emerging Markets Tracker). Strong growth and a buoyant stock market carried the country past its rivals even as inflation crept higher and the rupee lost ground.
The tracker, running since September 2019, ranks 12 emerging economies across seven indicators: GDP growth, manufacturing PMI, exports, inflation, import cover, currency moves and equity performance. India’s June score of 77.3 kept it well clear of Vietnam (73.2) and Malaysia (73.1), though the margin has been shrinking since May.
Growth remains the backbone of India’s ranking. GDP expanded 7.8% in the January-March quarter the latest confirmed number though economists expect the April-June figure to cool to roughly 7.0-7.3% as fallout from the West Asia conflict weighs on activity. Manufacturing told a similar story: the PMI eased to 53.5 in July from 54.2, still comfortably in expansion territory but losing steam.
Equities did the heavy lifting elsewhere. Foreign investors pumped ₹20,200 crore into Indian markets in July, their first net monthly inflow since February. That, paired with the RBI’s FCNR-B deposit window, pushed import cover up to 10 months from 9.7 a cushion that matters more given the currency’s wobble. The rupee slipped 0.9% against the dollar in July, a reversal from June’s 0.6% gain, settling near 95.6-95.7. Tellingly, the RBI shut the FCNR-B scheme a month ahead of its September 30 deadline, a signal it’s fairly comfortable with where the currency sits.
Inflation is the trickier piece. Retail prices rose to 4.5% in July from 4.4%, pushing further past the RBI’s 4% target, with food costs under pressure from patchy monsoon rains and lingering El Niño risk. Crude has offered some relief Brent has mostly held between $80 and $90 a barrel since May, well off triple digits, as India and other importers diversify their supply sources.
That inflation overshoot has the RBI on edge. The central bank left its repo rate at 5.25% this month, but minutes from the August meeting struck a noticeably more cautious tone. Governor Sanjay Malhotra said policymakers need to stay “watchful” as higher food, fuel and input costs feed through the economy, adding that tightening could follow if those risks materialize.
For now, growth is doing enough to keep India ahead. Malhotra called the 6.7% full-year growth projection “robust” despite the headwinds. But with inflation building, the rupee under pressure and manufacturing cooling, India’s cushion over the rest of the pack is thinner than it was a few months ago.
