Decoding Confusion

IBJ makes an earnest attempt to examine some of the unpredictable events of 2016 and see how they may pan out in 2017.

It was a year of shocking twists and turns. Uncertainty loomed large throughout 2016 as many Black Swan events, like Brexit and Donald Trump's victory in the US presidential polls, continued to surprise and puzzle people. Back home, a demonetisation exercise of an unprecedented scale caught Indians unaware and dealt a big blow to the economy that was set for a revival.

The global economy began on a rather weak note last year. Governments across the world struggled to trigger demand amid slow growth. Following a loose monetary policy to kick-start their economies, central banks of the eurozone and Japan went to the extent of unveiling negative interest rates. The continuous dip in the price of crude oil and the Chinese slowdown spooked global capital and currency markets. The US economy was fortunately turning around, and the prospects of a US Fed rate hike and consequent outflow of global investors' funds continued to keep emerging markets on tenterhooks.

Reforms galore

Surprisingly, 2016 began on a buoyant note for the Indian economy amid gloom around the globe. Two years of the Narendra Modi government had re-energised the Indian economy and raised investment and business sentiments. India stood out as a bright spot amid global gloom.

With the crude oil price on the decline, India's macroeconomic parameters had turned robust. A declining wholesale and retail inflation rates and a falling fiscal deficit made India an attractive destination for global investors. By the middle of the year, the country's plunging exports entered the positive zone and provided further fillip to the India growth story.