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Morgan Stanley Investment Management's Chief Global Strategist, Ruchir Sharma, believes that the global climate isn’t conducive for the Indian economy to clock a growth of above 8 percent.
“Nobody in the global economy is growing above 8 percent. We are the fastest growing economy. That’s a great marketing tag. But 8-10 percent growth is difficult because the global climate has changed. It’s unlikely for India to get there,” Sharma said at the News18 Rising India Summit.
He said India didn’t quite miss the bus on manufacturing growth, but lost time definitely. “We are now in an era of de-globalisation. It is now difficult to export your way to prosperity. Now we need to move to low-end manufacturing with low input costs. We didn’t quite miss the bus on manufacturing growth. We have lost time.”
Banking crisis
Sharma minced no words when he said that India’s banking crisis is letting the country down. There is a regulatory overkill in India’s banking sector he said. “Every country needs a public sector but no country is as unbalanced as India. PSU banks hold 2/3rd of the assets, while private banks are involved in more transactions. This is choking the Indian banking sector. There is regulatory overkill in the Indian banking sector because private banks will keep lending, but central banks are still holding assets.”
Ruchir Sharma said India has the highest number of millionaires leaving the country. “Since 2014, 23,000 millionaires have left this country. In 2017, about 7,000 millionaires left India. The year before it was 4,000. A major side-effect of this is that you need your own people to invest in your country. This affects domestic markets.”
“India has more good billionaires than bad billionaires. There are 60 percent inherited billionaires in India. The dynasty culture is also persistent," he said.
Delink markets from Elections
Sharma called for delinking of elections and markets. “The importance of politics is way exaggerated. I feel we should not draw results about markets from elections. Polls and bypolls don’t affect markets. It is fascinating to track politics, but economics has its own story," he explained.
Sharma also made interesting observations about elections. “Two out of three elections are lost. In the US, the incumbent ends up winning the election. The term anti-incumbency has been coined in India,” he said.
Moving on from India’s politics to the world economy. “Markets across the world have done so well because of zero interest rate. That is going to come down quickly. It’s only a matter of time,” Sharma said.
Cryptocurrency
Sharma cautioned about investing in cryptocurrencies like bitcoins, explaining that the “crypto boom” won’t last. "I think the crypto boom was the last vestiges of liquidity boom. I don't think the crypto boom can last and it is already cracking. I would not advise anyone to play the game.”
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