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India is “absolutely better cushioned” today than in 2013, when it was grappling with a currency crisis and trade slowdown, according to JPMorgan.
“Today inflation targeting is embodied in a statute book in India,” Kalpana Morparia, chief executive officer of JPMorgan (South and South East Asia), told BloombergQuint in an interaction. “That was a seminal piece of legislation India managed to get through. Also, our reserves are close to $400 billion today.”
Key highlights from the conversation:
Picture Amid U.S.-China Trade War
- There’s a lot of optimism in terms of underlying growth momentum across sectors like services and manufacturing.
- Dramatic changes in the rural economy in terms of higher productivity in agriculture, overall increase in rural incomes is propelling consumption.
Trade Deficit Woes
- India is far more integrated with the global economy than it was 10-15 years ago.
- Weakening rupee is helpful for exporting industries like pharmaceuticals, IT services and auto-components.
- Rupee fall can be a huge boon for agricultural produce and exports as we’re in a surplus situation.
- India offers a whole lot of downside protection because of a large domestic economy.
Is 2018 Similar To 2008 or 2013?
- Unlike 2013, today inflation targeting is now embodied in a statute book in India.
- We are much better cushioned as foreign-exchange reserves are close to $400 billion.
- Tools available to the policy makers today, that in 2008 or 2013, gives hope that we will be in the driver seat to prevent runaway volatility.
Effect Of Fed Rate Hikes On Emerging Markets
- Every emerging market is slightly differently placed and India is in the middle of the pack.
- India’s currency depreciation is much better than Malaysia, Indonesia, Brazil and Argentina. And above mentioned tools at the disposal of policymakers will offer flexibility.
Insolvency And Bankruptcy Process
- Much better than the earlier system and always takes time for a new statute to settle in.
- Insolvency Bankruptcy Code and Goods and Service Tax are landmark pieces of legislation since 1991.
- Equal power for the creditor is itself is a game-changer.
On The Recent Bank Merger
- It’s a clever move. The team engaged in consolidation can be ring-fenced to prevent contagion.
- There could be common accounts between these banks, which could only aid during the resolution or reconstruction process.
Digitisation In The Economy
- Demonetisation accelerated the acceptance of digital payments solutions and base bank account opening.
- Lot of potential benefits expected in terms of increase in agricultural productivity.
Here are edited transcripts from the interview:
. Read more on Global Economics by BloombergQuint.
Source: Global Economy