Arrival of the 'new mediocre' : Why global growth rates continue to be low.

Let me begin with some facts and figures-

1. The latest growth projections for the world economy as provided by IMF predict a 3.6 per cent growth rate.
2. The falling oil prices have failed to provide an impetus to the world economic growth.
3. As revenues have fallen, the oil companies have cut their expenditure and this has plummeted the global demand.
4. In many developing countries, like India, where oil is imported in huge amounts, the fall in prices has not been passed on to the customers.
5. The growth rate numbers from China and Japan are indicating a slowdown in the global economy.
6. Several central banks in the EU and Japan have moved to  negative interest rate policy  in order to boost demand.

This low rate of growth in the economies is being called the "new mediocre", a term  used by IMF Managing Director Christian Lagarde, is a cause of worry because of mainly two factors.

First, when the growth rates are low then the financial markets are bound to be unstable. Since most of the world markets are interlinked, so when one country's markets fail others feel the tremors. Also, the nervous investors have the proclivity to dump assets at even the mildest hint of trouble. This kind of money movement can wreck havoc for small and emerging economies.

Second, geopolitical risks have risen sharply in the recent years. The heightened tensions between Russia and U.S.; the humanitarian disaster and the influx of refugees into Europe; the possibility of BREXIT; the rise of protectionist tendencies in the U.S.; and the internal strife in several countries which can be a huge market, are some of the major geopolitical factors that are affecting business. And as someone rightly said,"when geopolitical risks rise, investors tend to retreat."

But, is there no way to recovery? How do we tackle this "new mediocre"? In my next blogpost I am going to explore the solutions to and roadblocks ahead of the global economy.