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India topping China’s growth is a head fake

TOKYO – There’s palpable excitement across Asia as India blows the doors of China in terms of headline economic growth. Yet the headwinds bearing down on the Indian rupee tell a far more troubling story about Narendra Modi’s economy.

India is, at present, the belle of the ball among major economies. Even after trimming its 2022 gross domestic product (GDP) forecast amid rising global inflation and interest rates, the International Monetary Fund (IMF) sees India growing 8%, down from an earlier 9% projection.

Darkening international trends have Luis Breuer, the IMF’s resident India economist, setting his sights on GDP closer to 7% in 2023. Figuring out the odds that Prime Minister Modi can sustain 8%-range growth is a “work in progress,” Breuer says.

The macroeconomic contrast with President Xi Jinping’s China is a stark one. Asia’s biggest economy grew just 0.4% in the April-June quarter from a year ago as Xi’s “zero-Covid” lockdowns hammered consumer and business confidence.

The latest numbers, and bubbling property market problems, darken further the outlook for the Chinese economy in 2022.