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India—Strong headline growth masks economic vulnerabilities

India is the fastest growing major economy. GDP growth surged to 8.2% in Q2, as the disruptions caused by demonetisation in 2016 and the introduction of the nationwide GST in 2017 gradually fade. But a rebound in oil prices has seen the current account deficit widen, while the rupee has fallen to a record low against the USD in nominal terms. Despite a large bank recapitalisation unveiled late last year, bad debt on banks' balance sheets is curtailing lending although the Indian Government is making considerable effort to address non-performing assets.

Macroeconomic vulnerabilities are compounding a poor record on business payment delays. According to the Atradius Payment Practices Barometer, the pro­portion of overdue domestic business to business (B2B) invoices increased again to 58% in 2018 (Chart). Almost 60% of respondents said that payment delays most often owed to insufficient availability of funds. Like in 2017, India recorded the highest proportion of uncollectable B2B receipts in the Asia Pacific—at 2.4%. A notable percentage of respondents reported needing to postpone their own payments to suppliers and losing revenue as a result. Australia’s exports to India surged over 30% to A$20b in 2017. Compelling new opportunities have been identified in the education, agribusiness, resources and tourism sectors. As such, exposure to these problems is likely to increase.

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