Various segments of the Indian economy – from policy makers, businesses and the financial system – appear to be singing from the same song sheet, in a turnaround from the earlier discordant notes across the economic spectrum, he said.
“Earlier, the beginning of every meeting (in India) was a little litany of things that are going badly,” Winters told ET in an interview. “Now, the early part of the discussion is, isn’t it going great? I have been coming to India for 35 years and the alignment between perspectives of local business people, small businesses, medium-sized businesses, large businesses, financial institutions, external investors, domestic investors, government, economists has never been this consistent.”
‘Global Banking Resilient’
India was the fastest growing major economy in the world in 2022, as other heavyweights faced challenges due to the energy crisis, Covid-related lockdown and supply disruptions. Furthermore, the record high inflation led to central banks raising interest rates. That eroded asset prices.
While the crypto meltdown led to bankruptcies, the bursting of bubbles in stocks and bonds wiped out trillions of dollars in investor wealth. India has weathered the storm with the least impact and stock indices at the highest ever premium to the MSCI Emerging Markets index.
Winters believes central banks need to run tight monetary policies to contain price pressures, which would translate into slower economic growth. “I’m still of the view that inflation is going to be pretty difficult to bring down,” said Winters. “I think central banks have to do a little more. Ideally, you can slow wage growth because I think that is really the driver at this point. You can’t slow wage growth without slowing the economy.”
The global financial system, especially the banking sector, is resilient, despite turbulence in the markets, though the same may not be true with the shadow banks.
“I think it is amazing we haven’t had more accidents,” said Winters.
“This is the worst year in markets since 1972. It has been horrific in both equity and fixed income markets. You get a massive shock with a pandemic, and then a further massive shock with wars and the effects of climate change and geopolitical tensions. And there’s almost no impact on the economy because the banking system is rock solid.”
