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India can beat Asian peers, even China: Morgan Stanley - International Business Times
India can beat Asian peers, even China: Morgan Stanley
By Staff Reporter
05 June 2009 @ 09:06 pm ISTNext Market Article
India can outperform the Asian region by a margin and even leave China behind in its trail, a top official of financial services major Morgan Stanley has predicted.
According to Morgan Stanley Asia chairman Stephen Roach, "India is a more balanced economy than the rest of export- led Asia" and it "can actually outperform at the margin versus the rest of Asia as it has a more balanced economy."
"The real surprise in Asia could be India. India could actually outperform the Asia region by a margin," Roach said, addressing the media at the Morgan Stanley 11th India summit.
Related Story: Morgan Stanley bets big on India's growth story
Roach said India's economy has shown more resilience in the present crisis than analysts' expectations and he was more upbeat about India's growth than its rival China. "For the first time in a dozen years, I am more optimistic about prospects for India than China," Roach said.
"China faces major challenges for the first time in 30 years," he said. "It pushed its export-led model too far, leaving it too dependent on the external climate."
"India has made improvements in the recent years from the standpoint of macro developments, especially higher savings, increased FDI and a modest improvement in the infrastructure share of Indian's GDP," Roach said.
Besides, "India has got a large collection of world-class companies, extraordinary entrepreneurs, well-developed markets and an educated workforce that will act in its favor," he said.
According to Roach, the victory of the UPA coalition in the recently concluded elections was a clear mandate that people wanted a stable and progressive government at the Center.
"The recent election changes the prospects for reforms," Roach said. "What has been missing in this interplay between the micro and the macro has been the political impetus to reforms."
Though the comprehensive win of the Congress party means that the newly elected government would not be subjected to pressure from its regional allies while making policy decisions, "the government and politicians need to seize the moment," Roach said.
On the issue of government stake sale in public sector enterprises, Roach said the process would help in bringing down the country's massive fiscal deficit that has widened to 6.2 percent of gross domestic product (GDP) in the last financial year ended March 31, according to a government statement released on May 29, as the government borrowed more to fund fiscal stimulus packages.
However, "India would continue to be vulnerable to external capital inflows if the new Government is not able to aggressively tackle the problems of these deficits," he warned.
Roach also said he supported Morgan Stanley's forecast of India's GDP standing between 5.5 percent and 6.5 percent for the next couple of years.
"This is an encouraging trend when the rest of the world is going through deep recession. Though it might be a little premature to think that India will be able to achieve 8 percent growththat it is not possible for at least another two to three years," he said.
Roach also warned that the worst of global crisis is not over and the current rally in global markets is not justified.
"The crisis is not even half over. The latest assessment from IMF suggests that by the time the crisis ends, over $4 trillion worth of toxic assets will be written down by financial institutions, globally. Today, the writeoffs total only $1.7 trillion," Roach said.
"Secondly, this is an unusually-synchronized recession in the world economy. Normally, in a recession, half of the world economy is contracting and about half of the world is rising. So, when the rate of contraction moderates, the balance swings pretty sharply towards expansion. This time, as of mid-2009, 75 percent of the world economy is contracting. So, the balance between contraction and expansion is skewed towards weakness that will limit the upside of the world economy," he said.
"Third is the record decline in consumption growth, a dramatic slowdown from the pre-bubble norm of 4 percent," he added.
Hence, as such Roach feels the current rally cannot really be justified. "The green shoots of recovery will turn brown this summer. Markets are pricing a V-shaped recovery, which is probably not going to happen. Markets will correct sooner rather than later," he said
India can beat Asian peers, even China: Morgan Stanley
By Staff Reporter
05 June 2009 @ 09:06 pm ISTNext Market Article
India can outperform the Asian region by a margin and even leave China behind in its trail, a top official of financial services major Morgan Stanley has predicted.
According to Morgan Stanley Asia chairman Stephen Roach, "India is a more balanced economy than the rest of export- led Asia" and it "can actually outperform at the margin versus the rest of Asia as it has a more balanced economy."
"The real surprise in Asia could be India. India could actually outperform the Asia region by a margin," Roach said, addressing the media at the Morgan Stanley 11th India summit.
Related Story: Morgan Stanley bets big on India's growth story
Roach said India's economy has shown more resilience in the present crisis than analysts' expectations and he was more upbeat about India's growth than its rival China. "For the first time in a dozen years, I am more optimistic about prospects for India than China," Roach said.
"China faces major challenges for the first time in 30 years," he said. "It pushed its export-led model too far, leaving it too dependent on the external climate."
"India has made improvements in the recent years from the standpoint of macro developments, especially higher savings, increased FDI and a modest improvement in the infrastructure share of Indian's GDP," Roach said.
Besides, "India has got a large collection of world-class companies, extraordinary entrepreneurs, well-developed markets and an educated workforce that will act in its favor," he said.
According to Roach, the victory of the UPA coalition in the recently concluded elections was a clear mandate that people wanted a stable and progressive government at the Center.
"The recent election changes the prospects for reforms," Roach said. "What has been missing in this interplay between the micro and the macro has been the political impetus to reforms."
Though the comprehensive win of the Congress party means that the newly elected government would not be subjected to pressure from its regional allies while making policy decisions, "the government and politicians need to seize the moment," Roach said.
On the issue of government stake sale in public sector enterprises, Roach said the process would help in bringing down the country's massive fiscal deficit that has widened to 6.2 percent of gross domestic product (GDP) in the last financial year ended March 31, according to a government statement released on May 29, as the government borrowed more to fund fiscal stimulus packages.
However, "India would continue to be vulnerable to external capital inflows if the new Government is not able to aggressively tackle the problems of these deficits," he warned.
Roach also said he supported Morgan Stanley's forecast of India's GDP standing between 5.5 percent and 6.5 percent for the next couple of years.
"This is an encouraging trend when the rest of the world is going through deep recession. Though it might be a little premature to think that India will be able to achieve 8 percent growththat it is not possible for at least another two to three years," he said.
Roach also warned that the worst of global crisis is not over and the current rally in global markets is not justified.
"The crisis is not even half over. The latest assessment from IMF suggests that by the time the crisis ends, over $4 trillion worth of toxic assets will be written down by financial institutions, globally. Today, the writeoffs total only $1.7 trillion," Roach said.
"Secondly, this is an unusually-synchronized recession in the world economy. Normally, in a recession, half of the world economy is contracting and about half of the world is rising. So, when the rate of contraction moderates, the balance swings pretty sharply towards expansion. This time, as of mid-2009, 75 percent of the world economy is contracting. So, the balance between contraction and expansion is skewed towards weakness that will limit the upside of the world economy," he said.
"Third is the record decline in consumption growth, a dramatic slowdown from the pre-bubble norm of 4 percent," he added.
Hence, as such Roach feels the current rally cannot really be justified. "The green shoots of recovery will turn brown this summer. Markets are pricing a V-shaped recovery, which is probably not going to happen. Markets will correct sooner rather than later," he said
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