Will Chinese Flu Hit India? Ruchir Sharma on Top Global Economic Trends
NDTV’s Prannoy Roy and Morgan Stanley’s Ruchir Sharma identify and explain the 10 top economic trends for 2016 that will dictate the global economy and stock markets
With the global economy in 2016 off to one of its worst starts in decades, does it mean we are headed for another global recession like in 2008 or is it time for a bounce-back?
NDTV’s Prannoy Roy and Morgan Stanley’s Ruchir Sharma identify and explain the top 10 trends of 2016 that will dictate the global economy and stock markets. (Watch Video)
Here are the highlights of what Ruchir Sharma said:
TREND 1: GLOBAL RECESSION EVERY 8 YEARS
-Global economy weak and weakening further
-2015 the worst year for global economy since 2008 crisis
-Recessions follow expansions historically
-Current economic expansion an aging cycle
-Need to look out for what’s going to trip the economy
-Need to intensely follow China
TREND 2: CHINA THE WEAKEST LINK
-Chinese economy has become too large
-Record debt facilitated China growth in the past
-China debt has become a source of vulnerability
-Chinese economy was on a debt binge
-China is now 10 per cent of global economic output
-Too much debt over short time always a warning bell
-40 per cent increase in debt in 5 years a danger mark
-Have seen a sharp fall in China’s debt profile
-China is paying the price of the debt binge
TREND 3: WILL CHINESE FLU HIT INDIA?
-Global trade growth collapsed to zero per cent in 2015
-Historically zero per cent global trade growth during recessions
-India’s exports have collapsed to negative 5 per cent
-India can’t grow at 8-9 per cent when exports at negative 5 per cent
-India has become most protectionist country
-India’s increased protectionism troubling
-India took 2nd highest protectionist measures in 2015
-Corporate India reeling
-India Inc saw zero per cent sales growth in 2015
-Profit growth likely to be negative for India Inc
-Dichotomy between GDP data and corporate performance
-India’s data credibility under question
TREND 4: COMMODITY PRICES PLUNGING TO NORMAL
-Current commodity prices near 200-year average
-Commodity cycles: boom for a decade, bust for 2 decades
-Oil prices not away from 100-year average
-Oil prices will continue to fluctuate
-$70-80/barrel a peak for oil prices for next 10 years
-Biggest risk to US in 2016: energy companies’ bankruptcy
-Oil prices at $50-60/barrel a sweet spot for India
-More fall in oil prices will be bad news for the world
-Oil prices at $50-60/barrel a sweet spot for India
TREND 5: GLOBAL DIS-INFLATION COMES TO INDIA
-India’s inflation problem far from being solved
-Inflation in India has fallen mostly on back of commodity prices
TREND 6: HARD FOR US FEDERAL RESERVE TO RAISE RATES MUCH
-US has never been bigger as a financial superpower
-50-60 per cent of world’s currencies tied to the dollar
-US Federal Reserve has to be conscious of the global economy
-Hard to imagine Fed raising rates by much
-US economy showing signs of slowing down
TREND 7: RUPEE CHEAP, OTHERS CHEAPER
-Emerging currencies have seen a carnage
-Great time for outbound travel for Indians
-Emerging currencies have adjusted significantly
TREND 8: FANG IN – BRIC OUT
-‘Fang’ the fashionable trend of this decade
-Companies getting funding despite being unlisted
-Explosion of unicorns across the world
-Companies more willing to remain private now
-Listing on markets no longer the attraction now
-Moving towards a phase of execution for unicorns
-Funding will become harder for unicorns
TREND 9: INDIA’S PUBLIC SECTOR PROBLEM
-Credit growth has fallen dramatically
-India needs to fix its banking system
-Seen privatisation by benign neglect
-Public banks have a share of 70 per cent of assets compared to the average of 30 per cent for emerging world
-Public banks have very high non-performing loans
-Public banks’ bad loans constraining credit growth
TREND 10: POLITICAL TURMOIL RISING GLOBALLY
-Global anti-incumbency wave is rising
-Global anti-incumbency a fall-out of weak economic scenario
-Highest violent conflicts in 2015 post-cold war
-Seeing escalating geo-political risks
[Source:- NDTV NEWS]