WEBVTT - India Bear Explains Why Growth Story is 'Inflated' 0:00:02.480 --> 0:00:06.640 You're listening to Asia Centric from Bloomberg Intelligence, the podcast 0:00:06.680 --> 0:00:09.440 that pulls back the curtain on global business so you 0:00:09.480 --> 0:00:13.160 can invest better across the Asia Pacific rim. I'm John 0:00:13.240 --> 0:00:14.480 Lee in Hong Kong. 0:00:14.640 --> 0:00:18.320 And I'm Katehmitriyeva with Bloomberg News, also in Hong Kong. 0:00:19.040 --> 0:00:22.439 India has been a bright spot globally this year as 0:00:22.480 --> 0:00:26.239 the fastest growing large economy in the world, but second 0:00:26.360 --> 0:00:29.520 quarter data last week showed there are some cracks emerging. 0:00:30.120 --> 0:00:33.520 The economy was broadly expected to slow later this year, 0:00:33.880 --> 0:00:37.040 and there are signs that it's already beginning as consumers 0:00:37.040 --> 0:00:41.400 and government spending pullback. While some economists were surprised by 0:00:41.400 --> 0:00:44.959 the lower than expected growth, at least one analyst has 0:00:45.000 --> 0:00:47.720 been bearish on the India story for a few years. 0:00:48.280 --> 0:00:52.919 Yes. Joining us this week is Miguel Chanko, Chief Emerging 0:00:52.960 --> 0:00:58.000 Asia Economist at Pantheon Macroeconomics. Welcome Miguel, Thanks. 0:00:57.720 --> 0:01:00.000 Guys, thanks for having Megail. 0:01:00.280 --> 0:01:03.600 You've been more critical than peers on India's economy for 0:01:03.680 --> 0:01:06.760 a few years now. Your outlook on GDP is the 0:01:06.840 --> 0:01:10.440 lowest among economists in our survey. Why is that? What 0:01:10.560 --> 0:01:11.399 leads you to that view. 0:01:12.600 --> 0:01:14.679 I think one of the main reasons is sort of 0:01:14.800 --> 0:01:17.840 an overestimation of how fast India is really growing. So 0:01:18.040 --> 0:01:20.080 if you go back to the last FISCO year, for example, 0:01:20.160 --> 0:01:24.240 so India supposedly grew by eight point something percent, right 0:01:25.560 --> 0:01:27.560 if I were to ask you, so for example, I'm 0:01:27.560 --> 0:01:29.600 the questionnaire here in you two or the guests, if 0:01:29.600 --> 0:01:31.000 I were to ask you, how much of that eight 0:01:31.040 --> 0:01:35.400 percent actually came from private consumption? In you main growth engine? 0:01:35.480 --> 0:01:37.839 What percentage of proportion will you put to that eight percent? 0:01:38.640 --> 0:01:40.039 At over half. 0:01:41.680 --> 0:01:45.360 Less than thirty percent? Okay, So over half of what 0:01:45.440 --> 0:01:49.000 contributed to India's supposedly strong eight percent growth rate last 0:01:49.080 --> 0:01:53.200 year came from a component in GDP called statistical discrepancies. 0:01:53.760 --> 0:01:56.960 So that's essentially the difference between the GDP by expenditure 0:01:57.000 --> 0:02:00.680 approach versus the GDP by industry calculation. So on the 0:02:00.680 --> 0:02:05.480 expenditure side, this unaccounted residual accounted for fifty two percent 0:02:05.680 --> 0:02:08.840 of growth last year. For me, looking at the numbers, 0:02:08.880 --> 0:02:11.639 that's not something tangible I can hang on to India's 0:02:11.680 --> 0:02:15.720 growth story. You know, I'm trying to forecast different avenues 0:02:15.760 --> 0:02:20.880 of growth consumption, government spending, investment, exports, and import forecasting 0:02:20.919 --> 0:02:24.840 statistical discopmancies is not is a false errand and something 0:02:24.880 --> 0:02:29.120 that's not really reflective of real economic activity on the ground. 0:02:29.240 --> 0:02:33.360 So this huge boost from this sort of statistical noise 0:02:33.480 --> 0:02:36.839 essentially flattered much of growth story last risk of year, 0:02:37.320 --> 0:02:40.760 and it masked a lot of the weakness underneath, one 0:02:40.800 --> 0:02:43.280 of them being private consumption, which grew about four percent 0:02:43.320 --> 0:02:45.760 less BISK of year. No one wants to talk about this, 0:02:45.840 --> 0:02:48.480 but four percent private suffering growth in India is the 0:02:48.480 --> 0:02:51.480 weakest it's been in a decade plus if we sort 0:02:51.480 --> 0:02:54.639 of exclude the COVID year. So you know, the slowdown 0:02:54.680 --> 0:02:58.040 in India that we're seeing now is really because this boost, 0:02:58.520 --> 0:03:01.799 this lift and flattery from statistical discrepancies is now starting 0:03:01.800 --> 0:03:04.840 to come out of the headline GDP growth numbers, and 0:03:04.880 --> 0:03:08.000 that's sort of revealing an underlying weakness. 0:03:08.760 --> 0:03:13.120 Mcguirl, Could you flesh out more of this statistical discrepancy? 0:03:13.240 --> 0:03:15.680 Like what is it? Can you possibly explain it in 0:03:15.760 --> 0:03:16.880 layman terms? 0:03:17.320 --> 0:03:20.160 Yeah, I mean I wish I could, but officially it's 0:03:20.280 --> 0:03:22.919 like I said, it's a difference between if you measured 0:03:22.960 --> 0:03:26.240 GDP by expenditure, so that's GDP you know, looking at 0:03:26.440 --> 0:03:30.680 components like private consumption, investment, government spending. That's one measure 0:03:30.720 --> 0:03:34.240 of GDP. Right, The measure of GDP is GDP by industry, 0:03:34.320 --> 0:03:37.760 So if you look at agriculture, manufacturing services, that's so 0:03:37.920 --> 0:03:40.760 that's the output side. So in India is some a 0:03:40.880 --> 0:03:45.840 quirky national account system. There is normally a small difference 0:03:45.840 --> 0:03:48.560 between the two. Normally they match, but in the last 0:03:48.600 --> 0:03:51.040 fiscal year there was quite a big difference. And this 0:03:51.200 --> 0:03:55.840 difference is represented as statistical discrepancies in the expenditure approach, 0:03:56.520 --> 0:03:58.800 and this accounted for, like I said, as fifty two 0:03:58.880 --> 0:04:01.360 percent of the growth UH in the last VESCO year, 0:04:01.400 --> 0:04:03.360 which again, like I said, it's nothing tangible that we 0:04:03.440 --> 0:04:06.080 can hold on too. So if you were, you know, 0:04:06.360 --> 0:04:09.320 banking on eight percent growth when fifty percent of that 0:04:09.680 --> 0:04:12.880 was driven by this noise in the GDP numbers, then yes, 0:04:13.200 --> 0:04:15.720 call me skeptical, call me bearersh I'm just looking at 0:04:15.720 --> 0:04:18.080 what I can actually hang my hat on, which is, 0:04:18.120 --> 0:04:22.960 you know, the concrete aspects of GDP by expenditure, consumption, investment, 0:04:23.000 --> 0:04:24.920 and a lot of this were weak last VESCAL year 0:04:25.160 --> 0:04:28.039 and are still somewhat relatively subbuted this fistical year at 0:04:28.120 --> 0:04:28.720 least in Q one. 0:04:29.800 --> 0:04:32.880 Has that been always the case where there's sort of 0:04:32.920 --> 0:04:35.880 the statistical discrepancies coming in, or was it just the 0:04:35.920 --> 0:04:40.080 case that last year was just the biggest we've seen. 0:04:41.320 --> 0:04:44.039 It's one of the biggest sort of discrepancies that I've seen. 0:04:44.040 --> 0:04:47.359 At least if you go back forty years before COVID, 0:04:47.520 --> 0:04:50.560 this component has gone down to share a GDP, which 0:04:50.600 --> 0:04:53.120 is a good thing because you know, measuring economic activity 0:04:53.120 --> 0:04:56.640 has become a bit more accurate over the course of 0:04:56.800 --> 0:04:59.359 history of a course of that time. But since COVID, 0:04:59.520 --> 0:05:03.560 there's been like an increase in this component's impact on GDP, 0:05:03.720 --> 0:05:08.080 at least headline GP since twenty twenty. So we're seeing 0:05:08.080 --> 0:05:11.240 this somewhat worrying trend. Maybe there's changes in the structure 0:05:11.240 --> 0:05:13.560 of being this economy that are not being captured or 0:05:13.560 --> 0:05:16.120 what have you. But yeah, at least in terms of 0:05:16.160 --> 0:05:21.479 the growth story, last year's statistical discrepancy contribution was one 0:05:21.520 --> 0:05:23.720 of the highest I've seen in many years. 0:05:24.480 --> 0:05:28.159 Does the gross value add get rid of that? I 0:05:28.200 --> 0:05:31.039 know there's two readings. India is an interesting economy. We 0:05:31.040 --> 0:05:34.760 don't just have GDP, we also have GVA. Does that 0:05:34.960 --> 0:05:38.320 get rid of some of that noise because economists do 0:05:38.920 --> 0:05:42.720 typically see the GVA as a better reading because it 0:05:42.760 --> 0:05:47.440 strips out the effects of transfer payments for taxes and subsidies, 0:05:48.000 --> 0:05:51.960 and that was actually above forecasts for Q two for example. 0:05:52.680 --> 0:05:56.440 Yeah, it does no wig, but even within that measure 0:05:56.480 --> 0:06:00.280 that the transfer and subsidies bits contributed quite significantly last 0:06:00.360 --> 0:06:05.120 year's growth story. Again, what does that mean for economic activity? Minimal? 0:06:05.839 --> 0:06:09.000 So if you look at what's tangible we can actually 0:06:09.279 --> 0:06:14.320 forecast and compare against monthly high frequency numbers. It was 0:06:14.440 --> 0:06:17.000 tangible that for me has been disappointing about INDUS growth stories. 0:06:17.080 --> 0:06:17.240 Up. 0:06:17.400 --> 0:06:21.560 Yes I've been very snoy but because really I've just 0:06:21.920 --> 0:06:25.200 tried to focus on what actually concrete that's happening in 0:06:25.240 --> 0:06:28.000 the economy based on India's national accounts, I'm not trying 0:06:28.000 --> 0:06:31.839 to These numbers are there for everyone to see. And 0:06:31.960 --> 0:06:34.960 it's quite funny like sort of maybe six or nine 0:06:34.960 --> 0:06:37.000 months ago when when this whole issue is that this 0:06:37.040 --> 0:06:40.359 while discrepancies became something that even the Chief Economic Advisor 0:06:40.360 --> 0:06:42.600 of India had to address at one point because it 0:06:42.720 --> 0:06:46.520 was so egregious that lift that that of the headline 0:06:47.040 --> 0:06:49.039 that he had to come out saying this is just 0:06:49.080 --> 0:06:52.720 sort of you know how India's GP growth headline is calculated, 0:06:52.800 --> 0:06:56.400 and it's a component that meaner birds and ebbs and flow, 0:06:56.880 --> 0:06:59.960 so there is a recognition that it's imperfect. But yeah, 0:07:00.320 --> 0:07:03.080 obviously the mainstream story is still how India is one 0:07:03.120 --> 0:07:05.840 of the main performers in the world, and that sort 0:07:05.839 --> 0:07:09.600 of seems to grab the most media attentionet and rightly so. 0:07:09.640 --> 0:07:11.840 But for me who has to look into the detail 0:07:12.600 --> 0:07:14.720 detail has been worrying in that respect. 0:07:16.080 --> 0:07:20.000 Asia Centric is produced by Bloomberg Intelligence, where more than 0:07:20.040 --> 0:07:24.120 five hundred experienced analysts and strategists work around the clock 0:07:24.160 --> 0:07:28.200 to bring you timely, world class research. Our coverage spans 0:07:28.240 --> 0:07:33.040 two hundred market industries, currencies, commodities and industries, as well 0:07:33.080 --> 0:07:36.320 as over two thousand equities and credits. If you like 0:07:36.400 --> 0:07:40.280 what you hear, don't forget to subscribe and chair. A 0:07:40.320 --> 0:07:42.520 lot of people who look at India are used to 0:07:42.560 --> 0:07:46.760 this eight percent growth. Do you think it's been overstated 0:07:46.840 --> 0:07:49.840 and what's the real underlying growth in your view? 0:07:50.520 --> 0:07:53.360 I think underlying growth over the last eighteen months or 0:07:53.360 --> 0:07:56.400 so it's been probably around six percent, and we're starting 0:07:56.440 --> 0:07:58.920 to see someone that convergence now right with that's left 0:07:58.920 --> 0:08:02.520 from systems coming out of the picture. Like I said, 0:08:02.880 --> 0:08:05.560 private consumption in the last fiscally was four percent, which 0:08:05.600 --> 0:08:08.520 is one of the weakest out turns annual alternasi've seen 0:08:08.640 --> 0:08:13.000 in years, stripping out the COVID hits. So underlying momentum 0:08:13.080 --> 0:08:15.440 is far below the sort of seven to eight percent 0:08:15.480 --> 0:08:18.400 rates we've seen before the most recent GTP numbers came 0:08:18.400 --> 0:08:22.320 out because the components of GDP that are like said, 0:08:22.360 --> 0:08:26.000 tangible have been a lot weaker than the headline suggests. 0:08:26.960 --> 0:08:29.920 Can we walk through those components, Like when you're looking 0:08:29.960 --> 0:08:33.800 at the accounts for India, if we're looking at consumer spending, 0:08:33.960 --> 0:08:40.199 a business investment FDI, what are you seeing in those sectors? 0:08:41.320 --> 0:08:43.920 I think certainly one of the bright spots over the 0:08:43.960 --> 0:08:46.600 last few years or so has been investment. You know, 0:08:46.640 --> 0:08:49.439 there's been a real strong momentum in that since COVID, 0:08:49.600 --> 0:08:52.040 and even though there's been somewhat of a moderation over 0:08:52.040 --> 0:08:54.880 the last few quarters, investment still is the main outperformer. 0:08:55.559 --> 0:09:00.560 Looking at the domestic picture, obviously government spending entered somewhat 0:09:00.559 --> 0:09:02.360 of a lull because the election, and like I said, 0:09:02.480 --> 0:09:08.360 prodic consumption has performed historically weak. That aside, though the 0:09:08.400 --> 0:09:12.360 more recent print of seven percent was quite respectable, and 0:09:12.600 --> 0:09:15.360 that sort of matches with some of the consumer services 0:09:15.360 --> 0:09:18.080 that we're seeing in the RPI, where spending intentions are 0:09:18.120 --> 0:09:20.840 starting to take back up again again. If you were 0:09:21.000 --> 0:09:24.240 sort of rank where much of the real growth and 0:09:24.320 --> 0:09:28.200 momentum has been coming from in India, domestically, at least, 0:09:28.640 --> 0:09:32.400 i'd say investment has been the star performer, followed by 0:09:33.160 --> 0:09:36.920 in close second and third sort of disappointing government spending 0:09:36.920 --> 0:09:39.800 and private consumption numbers. In terms of the external side, 0:09:39.880 --> 0:09:44.200 exports have had a fairly good run since since COVID, 0:09:44.240 --> 0:09:47.400 and that's true for a lot of emerging markets in Asia, 0:09:47.640 --> 0:09:50.600 maybe not so much China, but yeah, exports have also 0:09:50.640 --> 0:09:53.520 been quite punchy, if somewhat rocky over the that speak horders, 0:09:53.559 --> 0:09:56.720 but still you know, sort of setting record highs even 0:09:56.760 --> 0:10:00.400 after adjusting for seasonal noise. So exports has in quite 0:10:00.400 --> 0:10:02.800 a strong component of the Indian growth story. And if 0:10:02.840 --> 0:10:06.200 you delve more deeply into that as well, Indian exports 0:10:06.200 --> 0:10:09.560 of services have really boomed since COVID, and it's probably 0:10:10.240 --> 0:10:13.920 one sort of underreported aspect of the numbers we tend 0:10:14.000 --> 0:10:18.600 to as as economists as reporters focus on what's you know, 0:10:18.720 --> 0:10:21.560 reported on a regular basis, and that's mostly sometimes merchandise 0:10:21.600 --> 0:10:25.719 trade numbers. But Indian services exports have really grown substantially 0:10:25.760 --> 0:10:28.680 over the last few years and are now starting to 0:10:28.679 --> 0:10:31.560 compete with merchandise exports in terms of size, which is 0:10:31.600 --> 0:10:35.199 great because that's a fast growing sector. You know, in 0:10:35.480 --> 0:10:38.160 the IT and BPO side, that can really help not 0:10:38.280 --> 0:10:40.760 just with things like the root pea stability, but also 0:10:40.760 --> 0:10:43.200 in general trans of econome activity. It's an industry for 0:10:43.200 --> 0:10:45.400 the future. Sure what is included in. 0:10:45.280 --> 0:10:48.480 That you said it and what other industries are leading 0:10:48.559 --> 0:10:50.559 within that? With services exports. 0:10:50.600 --> 0:10:54.400 VPO, so business process outsourcing say IT services and BPO 0:10:54.480 --> 0:10:57.880 services are typically what account for most of indist service exports. 0:10:57.920 --> 0:11:00.560 Similar sort of with the Philippines in that space where 0:11:00.679 --> 0:11:04.160 IT services and BPO services because of the English language 0:11:05.360 --> 0:11:09.160 skills that sort of trently globally from both Indian and 0:11:09.200 --> 0:11:12.120 Philippines that they've been sort of the main players in 0:11:12.160 --> 0:11:13.200 Asia in this space. 0:11:13.600 --> 0:11:16.000 Is that what Infosys does Companies like. 0:11:15.960 --> 0:11:18.760 That, Yeah, essentially, but are far more diversified than that 0:11:18.840 --> 0:11:21.359 for sure, But yeah, that's one of their business areas 0:11:21.840 --> 0:11:22.160 is that. 0:11:22.080 --> 0:11:26.920 Potentially threatened by artificial intelligence? Are we seeing any potential 0:11:27.000 --> 0:11:29.880 risk there, like this one bright spot or one of 0:11:29.920 --> 0:11:32.800 the bright spots in the economy. Is there a risk of, 0:11:32.920 --> 0:11:36.800 for example, these call centers no longer requiring people being 0:11:36.880 --> 0:11:41.000 taken over by bots or chats. What are your thoughts. 0:11:41.440 --> 0:11:45.120 I'm no expert on AI, but I could definitely see 0:11:45.120 --> 0:11:47.760 that happening, especially at the early stage of any consumer 0:11:47.760 --> 0:11:51.160 facing interaction, right where you kind of filter out what's 0:11:51.320 --> 0:11:54.480 urgent and what can be resolved by simple queries. I 0:11:54.480 --> 0:11:58.160 suspect that we could see some replacement there, especially with 0:11:58.480 --> 0:12:02.400 smaller simple customers service questions. But yeah, we've get to 0:12:02.400 --> 0:12:04.400 see it, at least we get to see it in 0:12:04.440 --> 0:12:06.839 the numbers in terms of service exports. But yeah, sure, 0:12:07.000 --> 0:12:09.520 sort of three five years down the line, I wouldn't 0:12:09.520 --> 0:12:11.880 be surprised if there's some job lost there because of AI. 0:12:12.440 --> 0:12:16.440 Do you expect GDP growth to slow in the coming 0:12:16.520 --> 0:12:20.760 quarters ahead? Especially you sort of mentioned the consumer demand, 0:12:20.920 --> 0:12:24.320 how it's waning in factories are slowing. What are the 0:12:24.480 --> 0:12:26.840 signs right now in the data and the real economy. 0:12:27.600 --> 0:12:30.920 Yeah, I definitely expect to see GDP growth that continue slowing. 0:12:31.480 --> 0:12:34.600 We have forecasts of around the high six percent over 0:12:34.600 --> 0:12:36.720 the next few quarters and sort of turning down to 0:12:36.720 --> 0:12:39.840 the low six early next year and high fives late 0:12:39.880 --> 0:12:44.760 twenty twenty five. So yes, essentially I expect consumer demander 0:12:44.880 --> 0:12:47.000 main fairly sluggish. Yes, we had a good growth print 0:12:47.000 --> 0:12:50.160 for the most recent report, but consumers are still very 0:12:50.200 --> 0:12:52.120 much under pressure in the economy because I feel look 0:12:52.120 --> 0:12:54.240 at the state of their household balance sheets is still 0:12:54.280 --> 0:12:56.400 very much under pressure and much of the minimum moment 0:12:56.520 --> 0:12:58.640 we've seen in consumption has been driven by debts, which 0:12:58.640 --> 0:13:01.320 I don't think is sustainable. There was a huge increase 0:13:01.440 --> 0:13:06.040 in households borrowing sort of during the post COVID reopening period, 0:13:06.400 --> 0:13:11.240 and we're now starting to see this rollover quite sharply investment. Yes, again, 0:13:11.360 --> 0:13:13.280 as I mentioned previously, it has been one of the 0:13:13.280 --> 0:13:15.400 strong points of the India's economy, but I don't really 0:13:15.400 --> 0:13:18.560 expect us to continue, especially in an environment where monetary 0:13:18.559 --> 0:13:21.680 policy is likely to remain quite tight. So we've sort 0:13:21.679 --> 0:13:24.920 of started to see now the in terms of corporate borrowing, 0:13:25.080 --> 0:13:27.000 it hasn't been as strong as as consumer debt, and 0:13:27.000 --> 0:13:30.040 I expect some of the momentum that's left in corporate 0:13:30.040 --> 0:13:32.240 borrowing to start coming down as well as as the 0:13:32.360 --> 0:13:34.959 RBI's industry has from twenty two to twenty twenty three 0:13:35.000 --> 0:13:38.560 start to filter through more to the real economy. So yes, 0:13:38.920 --> 0:13:41.480 in terms of private domestic land, which is what you 0:13:41.480 --> 0:13:44.440 know been broken down to that. It's that's consumption and investment, 0:13:44.760 --> 0:13:48.920 the main, real, big parts of Indias economy. I expect 0:13:49.080 --> 0:13:52.640 these two main areas to cool over the next few years. 0:13:52.840 --> 0:13:55.000 I'm not expecting a crash. Don't get me wrong, right, 0:13:55.080 --> 0:13:57.040 I am bearish on India, but it's not like I'm 0:13:57.080 --> 0:14:00.200 expecting it to be a doomsday scenario. We're in a 0:14:00.200 --> 0:14:03.560 cyclical slowdown and technically these two things will get affected 0:14:03.559 --> 0:14:07.440 by type Monte policy type fiscal policy or Titanic fiscal policy, 0:14:07.960 --> 0:14:09.000 and there's no escaping that. 0:14:10.480 --> 0:14:14.240 I'm curious how much pushback do you get from clients 0:14:14.360 --> 0:14:16.079 or internally on this view. 0:14:17.280 --> 0:14:24.360 Quite a bit, because no one wants to mess with 0:14:24.400 --> 0:14:27.160 India as the drawling of the em side, right, and 0:14:27.200 --> 0:14:29.800 there's a lot of money now the stark market has 0:14:29.880 --> 0:14:34.960 gone gangbusters, and obviously I'm up against that narrative. A 0:14:35.040 --> 0:14:37.440 lot of people tend to lose if I'm right, you know, 0:14:37.720 --> 0:14:42.480 so I don't mind it that. I don't mind that argument. Normally, 0:14:42.520 --> 0:14:44.160 all I have to do is point them to the 0:14:44.200 --> 0:14:46.800 actual statistics. And like I said, fifty two percent of 0:14:46.840 --> 0:14:49.680 growth last FASCO year was from patistical disturpancies. If you 0:14:49.680 --> 0:14:51.360 want to bank on that, that's up to you. 0:14:51.720 --> 0:14:54.520 I don't, yeah, because like, if India grows at the 0:14:54.600 --> 0:14:57.920 low six percent level, look, it's still okay compared to 0:14:57.960 --> 0:15:02.040 any other country. But there's such high exp for India. 0:15:02.120 --> 0:15:05.080 Yes they are, And I'm still really bullish long term 0:15:05.120 --> 0:15:08.320 structurally about Indian growth story. So like I said, typically, 0:15:08.480 --> 0:15:11.640 yes I am on downbeach side, but structurally, India has 0:15:11.680 --> 0:15:13.960 a lot going for it as compared to most em countries. 0:15:13.960 --> 0:15:17.560 You know, it's it's demographic dividend story is still very 0:15:17.640 --> 0:15:22.040 much alive and kicking. There's so much potential for labor 0:15:22.120 --> 0:15:24.800 to move. So forget you know, the increase in the 0:15:24.800 --> 0:15:27.320 workforce over the next few years. The workforce now, and 0:15:27.320 --> 0:15:29.360 there's so much untaped potential there because a lot of 0:15:29.360 --> 0:15:33.800 them are still engaged in agriculture based on the best estimates, 0:15:33.840 --> 0:15:36.160 a lot of that can still move to manufacturing services 0:15:36.200 --> 0:15:39.600 where you know, higher productive areas I'm still very bullish 0:15:39.640 --> 0:15:43.040 about the structural story of India being a democracy more 0:15:43.080 --> 0:15:45.360 stable long term. Yes, it's MESSI but it's more stable 0:15:45.400 --> 0:15:49.720 long term. And you know, high saving, straight high investment 0:15:49.760 --> 0:15:53.400 rates historically is still very much a factor now that's 0:15:53.440 --> 0:15:56.480 going for it. So yeah, yes, I am bullish long term. 0:15:56.560 --> 0:15:59.920 Structurally the story is still very solid. I'm not denying that. 0:16:00.040 --> 0:16:02.560 But tyclically, I think people are sort of underestimating the 0:16:02.600 --> 0:16:05.720 scope of the sharpness of technical slow down over these 0:16:05.800 --> 0:16:07.400 next few years. 0:16:08.160 --> 0:16:12.680 What does that mean more broadly for competition with China? 0:16:12.920 --> 0:16:17.720 For example, We've seen this narrative play out. China's economy 0:16:17.800 --> 0:16:21.200 is structurally slowing, I think, faster than a lot of 0:16:21.280 --> 0:16:25.520 economists had expected. We're not seeing any signs of increased 0:16:26.040 --> 0:16:30.120 fiscal spending to boost that or change that picture. And 0:16:30.520 --> 0:16:32.760 India is also now slowing as well. Does this sort 0:16:32.800 --> 0:16:35.840 of narrow the gap maybe a little bit between those 0:16:35.840 --> 0:16:38.120 two countries, Yeah. 0:16:38.400 --> 0:16:40.320 A little bit, but you kind of have a squint 0:16:40.360 --> 0:16:44.240 to see it. I guess the difference is in scale, right, 0:16:44.320 --> 0:16:48.200 So China is a seventeen point something jillion dollar economy, 0:16:48.760 --> 0:16:52.720 India is three point five at least last year, and 0:16:53.560 --> 0:16:56.520 a seventeen point five trillion dollar economy growing at five 0:16:56.560 --> 0:17:00.280 percent versus a three point five trillion dollar economy at 0:17:00.320 --> 0:17:03.360 seven percent, there's still no match to that. So even 0:17:03.400 --> 0:17:06.000 even the Chinese headline growth is lowered, I looked at 0:17:06.000 --> 0:17:08.720 the numbers on this yesterday. Roughly speaking, in real terms, 0:17:08.840 --> 0:17:12.400 China's growth is producing a new Thailand and Philippines every year. 0:17:13.040 --> 0:17:17.919 In real terms, India's growth Indians growth, Yes, it's at 0:17:17.960 --> 0:17:20.399 a higher seven percent, save a seven eight percent, but 0:17:20.880 --> 0:17:22.680 from a much lower base of a three point five 0:17:22.720 --> 0:17:26.200 trillion to ole economy isn't even producing a whole Vietnam. 0:17:26.560 --> 0:17:29.560 So if you look at that in those terms of 0:17:29.760 --> 0:17:32.880 real you know, dollar output in fishing and justine terms, 0:17:32.920 --> 0:17:35.720 how much these two economists are growing, all Chinese is 0:17:35.720 --> 0:17:38.080 adding to the world economy four times more than what 0:17:38.160 --> 0:17:42.080 India is just because of scale. So yes, there is 0:17:42.119 --> 0:17:44.480 some ketchup there, but again, like I said, you have 0:17:44.520 --> 0:17:47.160 to squint to see it, and it'll probably be retired 0:17:47.280 --> 0:17:50.520 by then. When when when in India actually does ketchup? 0:17:50.800 --> 0:17:52.919 Because it's going to take a long time and the 0:17:52.960 --> 0:17:56.479 scale difference is just so vast that yes, there's ketchup, 0:17:56.520 --> 0:17:57.399 But it's it's minimal. 0:17:58.520 --> 0:18:01.960 Go just to further discuss this point in the relationship 0:18:02.000 --> 0:18:04.399 with China, a lot of people talk about China plus 0:18:04.440 --> 0:18:08.080 one and how India is a big beneficiary, and we've 0:18:08.080 --> 0:18:11.720 seen companies like Apple slow down their production in China 0:18:11.760 --> 0:18:15.520 and produce more in India. Are we starting to see 0:18:15.520 --> 0:18:18.960 these come through in the numbers like the economic GDP numbers. 0:18:19.320 --> 0:18:21.880 It's hard to say, because I mean, yes, yes, I'm 0:18:21.880 --> 0:18:25.639 aware of that trend, and it does benefit India sectorally 0:18:25.880 --> 0:18:28.199 at some level. But if you look at manufacturing as 0:18:28.200 --> 0:18:30.600 a share of GDP and yeah, it's been fairly constant 0:18:30.680 --> 0:18:35.080 around seventeen percent over the last few years. So if 0:18:35.119 --> 0:18:37.840 I was to see a material boost in that story 0:18:37.880 --> 0:18:40.200 of you know, China plus one benefiting the likes of India, 0:18:40.240 --> 0:18:43.879 then I I'd really want to see shares of manufacturing, 0:18:43.920 --> 0:18:46.920 shares of export merchandise export grow as a percentage of 0:18:46.960 --> 0:18:51.560 the economy relative to where they were before. But I mean, 0:18:51.600 --> 0:18:53.439 in this is just one of the main beneficiaries of 0:18:53.480 --> 0:18:56.600 this sort of diversification away from China. Most of this 0:18:56.720 --> 0:18:59.919 is still largely benefiting countries in Asian so you know, 0:19:00.240 --> 0:19:03.560 Vietnams for example, prime beneficiary of the Chinnel plus one story. 0:19:04.920 --> 0:19:08.120 I'd say what's sort of underappreciated on the India side 0:19:08.200 --> 0:19:11.040 is that there are a lot of reasons why companies 0:19:11.080 --> 0:19:13.760 are hesitating to invest more in India in this space. 0:19:13.920 --> 0:19:16.919 So the labor law still remain very strict. As I 0:19:17.040 --> 0:19:19.640 mentioned previously, a lot of the workforce is still tied 0:19:19.680 --> 0:19:22.040 up in agriculture and a lot of that constraint is 0:19:22.119 --> 0:19:26.000 policy based, right. So for example, India has a very 0:19:26.200 --> 0:19:30.000 well known minimum support system for agricultural prices which basically 0:19:30.040 --> 0:19:32.960 guarantee farmers you know who plant rice and wheat and 0:19:32.720 --> 0:19:36.560 what have you, guaranteed income un their produce. Why would 0:19:36.600 --> 0:19:40.240 someone who's forming, who has this risable for lack of 0:19:40.240 --> 0:19:42.639 a better term, take the risk of moving into a 0:19:42.640 --> 0:19:45.679 different sector if they have a guaranteed income, because the 0:19:45.720 --> 0:19:51.280 government in India really supports the agricultural sector to that degree. So, yes, 0:19:51.320 --> 0:19:53.800 there is potential for India to be a bigger player 0:19:53.840 --> 0:19:56.119 in global trade and manufacturing because of the Chinnel plus 0:19:56.160 --> 0:19:58.080 one story, but there are a lot of policy reasons 0:19:58.119 --> 0:20:01.520 why India probably won't read the benefit as fast as 0:20:02.000 --> 0:20:05.040 say others like Vietnam or in Southeast Asia. 0:20:06.440 --> 0:20:10.760 I want to ask about the implications for macro policy 0:20:11.440 --> 0:20:17.640 of slower economy, especially after the second quarter data missed 0:20:17.720 --> 0:20:21.399 even the central bank estimates. Do you see the RBI 0:20:21.800 --> 0:20:25.720 moving faster as a result of that? What are your 0:20:26.040 --> 0:20:28.800 expectations for when they'll start cutting rates? 0:20:29.880 --> 0:20:31.840 I mean, i'd like to think so else my forecasts 0:20:31.840 --> 0:20:36.199 are wrong. So we were sort of above consensus in 0:20:36.280 --> 0:20:38.840 their respect that we expect fifty basis points of cuts 0:20:38.880 --> 0:20:41.560 from DARBA this year, whereas consensus at the moment last 0:20:41.600 --> 0:20:43.440 time I checked at least was twenty five bas points, 0:20:43.480 --> 0:20:46.560 so's not too far. But we're expecting the arbited to 0:20:46.560 --> 0:20:49.240 cut much sooner, so from the October meeting. And yes, 0:20:49.280 --> 0:20:52.679 i'd like to think that because Q two from the 0:20:52.680 --> 0:20:56.600 physically your perspective, Q one missed the RBI's seven point 0:20:56.720 --> 0:20:59.080 one or seven point two forecasts, that they'll start looking 0:20:59.080 --> 0:21:02.439 more into supporting growth. But from what I read about 0:21:02.480 --> 0:21:05.040 what the governor said a few days ago, they already 0:21:05.080 --> 0:21:07.600 have a ready mid excuse for y Q one missed, right, 0:21:07.640 --> 0:21:10.399 so they're blaming the election for it. It sounds like 0:21:10.440 --> 0:21:12.960 there's still no real appetite in the RBI to eat 0:21:13.080 --> 0:21:17.400 monetary policy anytime soon. But I think essentially the RBA 0:21:17.400 --> 0:21:19.560 has been behind the curve in terms of easing because 0:21:19.880 --> 0:21:22.840 we've had core inflation now that that's been historically low 0:21:22.880 --> 0:21:25.760 in India for a number of months, and that's really 0:21:25.800 --> 0:21:28.240 what no RB should be focusing on that because that's 0:21:28.240 --> 0:21:31.919 where the headline wage will eventually converge and follow going forward. 0:21:32.000 --> 0:21:35.560 So yes, I'd like to think that we'll see some 0:21:35.720 --> 0:21:39.640 easing in the immediate future in terms of the RIIS policy, 0:21:39.680 --> 0:21:42.280 But it sounds like, at least from the most recent 0:21:42.320 --> 0:21:45.080 rhetoric from the governor, that they've got ready mid excuse 0:21:45.160 --> 0:21:48.720 why not? Why why do stand pat at least in 0:21:48.720 --> 0:21:49.359 the next meeting? 0:21:50.480 --> 0:21:54.120 Why didn't inflation take hold in India as much as 0:21:54.160 --> 0:21:56.160 in other countries, even neighboring countries. 0:21:57.119 --> 0:22:01.080 Well, much of why India sort of shielded from twenty 0:22:01.080 --> 0:22:04.040 twenty three is because there's been an implicit fix on 0:22:04.240 --> 0:22:07.800 prices in India. So a lot of the all retail 0:22:07.880 --> 0:22:10.960 side to pump prices and stuff is still very much 0:22:11.040 --> 0:22:14.800