Amid border row, China reminds India how fragile its economy is

Its aggressive stance not working in the ongoing border standoff, China has now reminded India of its “fragile economy”.

China's state-run Global Times has said in an editorial that the recent Goods and Services Tax (GST) and last year’s demonetisation have slowed down growth in India.

"It comes as no surprise that Indian business activity contracted sharply after the implementation of a new national tax in July. Questions are being raised about whether the country's reform program is too aggressive and how long the economic sluggishness will last," it says. It says businesses are confused about the new taxation system.

The comments came days after data showed that Nikkei India Services PMI Business Activity Index plunged from June's eight-month high of 53.1 to 45.9 in July, its lowest level since September 2013.

However, it says the new tax is just an immediate cause of slowdown and there are long-term trends that persist. "While iron fist reform measures seem to have caused the slowdown in India's economic growth, the real reason may have been the country's economic fragility," it says.

"Due to the large amount of bad loans in sectors such as power, infrastructure and steel, India's banking sector is reluctant to extend new loans these days. That situation directly led to the slump in investment growth by domestic companies, which hit a 25-year low in fiscal 2016-17. Whether the rate cut can help revive investment remains to be seen. Hopefully, it will inject sufficient momentum to help the Indian economy sustain its aggressive reform agenda," the editorial says.