Looking at the global crisis, several stock experts and economists say ‘The steeper the fall, the faster the recovery’. Others aver we will never see that V-shaped recovery. Stephen Roach, chairman of Morgan Stanley Asia, belongs to the latter camp. Roach, who says “In the near term, I am more bullish on India”, talked about the global as well as Asian economy in Mumbai on Tuesday. DNA reports on the economist, whose business card also features his details in Hindi. Excerpts from the interaction:
On Asian de-coupling
To have a view on Asia, you need to have a view on the global scenario. It (Asia) has not, and will not, de-couple. External demand shock could create serious growth problems. The Next Asia will de-couple, today’s Asia will not.
On China vs India
In the near term, I am more bullish on India. The government will take strength from reforms. In the Budget, we might see tax reforms. China did the right thing during the economic crises, but at the same time, they raised some questions about sustainability. This year, they will see some back-tracking. Indian authorities have to focus on the right exit strategy or they run the risk of inflation. I am sure the Indian authorities will do the right thing.
China has been put on the pedestal for bringing focus on to the Asian economy. For 10 years, its GDP was a little over 10%. But during that period, the employment growth was hardly 1%. They had the fastest growing GDP, but they were the weakest in terms of incremental employment. In India, the employment growth was 1.5% per year.
On India
The past nine months have been very constructive. Micro has never been a problem with India, it is the macro-economy which is. India is treading into a sweet path with large part of its financial services sector being stable. The savings rate is up and the macro picture has gotten better. Post election, the government has a better chance of pushing reforms. There is very encouraging development. The Indian growth model is more balanced.
On the Budget
Fiscal consolidation will be a theme of this year’s Budget in India. India is doing well and you don’t need emergency policies when you are doing well.
On infrastructure in India
The government has promised to construct 20 km of roads each day. It is a great call and I hope that [it] will be done. The
main constraint for the Indian manufacturing sector is the supply-chain management. Infrastructure is bottoming out its share in the GDP. It needs to move up sharply.
On key risks in India
The biggest risk is foreign capital to fund deficits. The problem with having sovereign debt is that the markets get concerned about the growth prospects.
On the US unemployment data
The situation in the US is horrible. While the data shows that US unemployment has come down, it didn’t happen. It is a mirage. The drop in unemployment ratio is because people are giving up looking for jobs. If you have given up looking for job, then the government stops counting them in the unemployed. Stress continues to linger.
Comments