印度在全球一体化中的程度如何？：挑战误区，寻找机遇

Issuer of report:The Hongkong and ShanghaiBanking Corporation Limited Singapore BranchView HSBC Global Research at:https://www.research.hsbc.comListen to our insightsFind out moreHSBC Global Research PodcastsPranjul BhandariChief Economist, India and IndonesiaThe Hongkong and Shanghai Banking CorporationLimited, Singapore Branchpranjul.bhandari@hsbc.com.sg+65 6658 4976Aayushi ChaudharyEconomist, India, Indonesia & Sri LankaHSBC Securities and Capital Markets (India) PrivateLimitedaayushi.chaudhary@hsbc.co.in+91 22 2268 5543Priya MehrishiAssociateBangaloreEconomicsIndia ◆◆◆ Moreopen, more benefitsThere is a general sense that India is a relatively inward-looking economy. After all,agriculturemakesupc18% of GDP and depends more on weather patterns than international demand.And India is more domestic demand-driven, compared to some export-led Asian economies.Having said that, we find that India has grown at its fastest pace in periods of rising globalintegration with the world. After all, a whole new market opens up when a country isopen to it.We use the rolling correlation between India and world growth as a measureof globalintegration in this report, and find that the2000-2010decade was particularly striking as aperiodofrisingglobal integration andstrongIndia GDP growth (c8% per year,seeexhibit1).This is the time India was slashing import tariffs and integrating furtherintoglobal trade,resulting in higher export growth, global export share and GDP growth.In the next decade,2010-2020,India began to raiseimport tariffs. This period saw a fall inexport growth, global export share and GDP growth (see:India in the new world: Slashingtariffs, seeking FDI, 6 March 2025, exhibits2 and 3).We also note thatduringthelast few years, i.e. those following the pandemic,have seen a riseback up in global integrationand GDPgrowth. As we will discuss later in the report, India ismaking efforts to integrate more withtheglobaleconomy. Buthow large and lastingagrowthimpact, willdepend on continued efforts to integrate.One may argue that higher integration exposes a country to global volatility, which may benegative for growth. We look into this carefully through a VAR regression analysis, and find thatthe positive impact of being more integrated with the world is higher and longer lasting than thenegative impact of being exposed to global volatility (seeexhibits4 and 5).All said, deeper interlinkages with theworld haveledto higher growth over time,more thanoffsetting the negative impact ofrise in volatility.How integrated are the various sectors?Next, we turn our attention to sectoral flavours, because they shed light on the nature ofintegration with the world and its impact back home.We break down GDP on the expenditure side into consumption, investment and exports, andfind some interesting, and even surprising,takeaways.Comparing investment,consumptionand export trends.In the pecking order, consumptionis most integrated with world growth, followed by investment and then exports(seeexhibit 6).This is rather surprising asonemightimagineexports to be most correlated with global growth.As we explore more closely later, one reason could be that India’slinkageswiththe worldarestrong on the financial integration side, which impacts consumption, but more limited on thetrade side, which influencesexportsand thereby,investment. 2India grows faster when moreglobally integrated, e.g. the2000-2010periodPositive impact of globalintegration trumps negativeimpact from higher volatilityConsumption seems moreglobally integrated thaninvestment and exports…… likely influenced byglobalfinancialintegrationoutpacing trade integration Investmentdetails. India’s investment growth has a strongc70% correlation with world growth(see exhibit7). We breakdown investment growth into several parts–public, private corporateand household investment. What stands out is the rather divergent trend in corporate versushousehold investment.Corporate investment has a higher correlation(of 75%)with world growth compared to householdinvestment(of 40%). Theglobalinterlinkages of corporate investmentdid not really fall in the 2010-2020 period (barring the pandemic years, seeexhibit8).This not surprising. We find that corporate capex globallymoves in unison, driven bycommonfactors(for instance,risk sentiment impacting FDI flows).On the other hand, household investment has a smaller correlation(of 40%) with world growth (seeexhibit9). Itis importantto note here that household investment in India includes not just real estateandhousing, but also investment by small firms.Consumption. Consumption has an even higher correlation with world growth than investment. It fellin the2010-2020period, but has risen since. In fact,the correlationhas risen to 100%, which isabove previous highs.We breakdown private consumption into two parts–discretionary and essentials (seeexhibits10and11)1. Between these, discretionary consumption has a much higher correlation with world growth(of alm