A disorderly slowdown in China and regional geopolitical tensions could derail optimism surrounding India's outlook next year, according to a new report.
Asia's third-largest economy is closing out the year with a bang as cheap oil boosts its fiscal position and investors cheer Prime Minister Modi's pro-business reforms, making Indian markets one of the world's best performing hedge fund strategies this year, according to Hedge Fund Research (HFR). The renewed confidence is crucial to India maintaining its status as the current favorite among emerging markets.
"From the Indian perspective, how China manages the readjustment of its economy and how secure South Asia remains will be two major determinants that will influence world affairs in 2015," warned Mumbai-based think tank Gateway House this week.
South Asian security risks include another Mumbai-style terror attack in India, a military coup in Pakistan, the resurrection of the Taliban in Afghanistan, as well as the resumption of anti-India terrorist groups in Bangladesh.
Meanwhile, stalled economic activity in Beijing poses considerable risks for the entire world since Beijing is the largest trading partner for several nations, including India. Trade between the two economies totaled $65.5 billion last year and $66.5 billion in 2012.
The group outlined the two worst-case scenarios for India depending on these two factors.