Why are global CEOs bullish about India?

Deutsche Bank CEO Christian Sewing recently told a financial daily that India is the ‘shining star’ of the global economy, which is facing a decade of volatility due to the Ukraine war, global inflation and supply chain disruptions.

Apart from Sewing, Citigroup CEO Jane Fraser and JPMorgan CEO Jamie Dimon have also highlighted India’s ability to reap benefits amid rising geopolitical risks, particularly from the recent shift in globalisation patterns, which has seen western companies take their supply chains away from China. 

IMF Managing Director Kristalina Georgieva also appeared bullish about India when she recently said that the country continued to be ‘a bright spot’ in the global economy despite global uncertainty and headwinds.

At the start of September, HSBC Group Chief Executive Noel Quinn had told a financial channel that India is well-positioned to become a major global supplier. He pointed at the new manufacturing plants coming up in India and how the government had created a politically stable environment on the domestic front. 

Looking beyond economic reforms like the GST as a reason for being bullish about India, he was confident that geopolitics was also at play and driving the re-adjustment in supply chains.

India is more attractive today, but not entirely due to its own economic performance. Gautam Adani perhaps best explained why global CEOs were bullish about India in his keynote address at the recent Forbes Global CEO Conference. The chairman of the Adani Group said that the global turbulence had accelerated India’s opportunities. 

From a political, geostrategic and market perspective, it had turned India into one of the few relatively bright spots. But, he stressed that the term “relatively” was important, citing the worsening conditions in Europe, the United Kingdom's continuing slide, and China's increasing isolation. Adani also admitted that India was far from perfect. But, he expressed his belief that India’s real growth has only begun.

This readjustment between India and other economies is quite evident. China, the world's economic engine, is set to see its economic output fall behind the rest of Asia for the first time since 1990. This is what the new World Bank forecasts have to say, highlighting the damage done by Beijing’s zero-Covid policies and the meltdown in its property market. 

Meanwhile, Europe is preparing for a winter that will bring with it an energy crisis. The UK is beset by high inflation, which the Bank of England has struggled to moderate. Then there is the cost-of-living crisis. A few days back, the UK also saw its most dramatic currency crisis in recent history. Towards the end of September, an Economist poll revealed that three in five Americans feel the US is in a recession.

That’s not to say all’s well in India. Prompted by the lower-than-expected GDP growth in April-June, the RBI has revised the FY23 growth forecast to 7 per cent from 7.2 per cent. The inflation forecast of 6.7 per cent for FY23 has also been retained despite a sharp drop in international crude oil prices.

Finance Ministry recently said that managing inflation and external sector pressures had taken precedence over growth. India’s current account deficit in April-June was at 23.9 billion dollars. This was much higher than the 13.4 billion dollars in January-March 2022. India has been facing upward pressure on its import bill since the beginning of 2022 because of Russia's invasion of Ukraine.

Expenditure on new projects has also slowed down for the second quarter in a row amid higher borrowing costs. According to CMIE data, there were new projects worth a cumulative Rs 3.26 trillion in Q2FY23, much less than Rs 4.39 trillion in Q1FY23 and Rs 8.46 trillion in Q4FY22. Spends on new projects declined 4.4 per cent on a year-on-year basis, too, from Rs 3.41 trillion in Q2FY22.

In a recent column, analysts Abhishek Anand, Josh Felman and Arvind Subramanian share how claims of India being a bright spot stack up. According to them, while the economy is out of the ICU, its health remains fragile. They point out that in terms of GDP, the economy is just 3.8 per cent larger than it was three years ago.
 

They argue that while sustained rapid growth can be achieved, the country's macro stance must be strengthened first. While positive sentiments from global CEOs are welcome, as Anand, Felman and Subramanian argue, perhaps caution, even some concern, is the need of the hour.