#IndiaInvConf – Global Economic Outlook: Why the Next 30 Years Will Look Nothing Like The Last 30

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Speaker: Manoj Pradhan, Senior Economist, Global Economics Team, Morgan Stanley

Moderated by: Jayesh Gandhi, CFA, President IAIP and Senior Portfolio Manager Birla Sun Life AMC

Contributed by: Kunal Sabnis, CFA, Chair Communication, IAIP and Analyst VEC Investments

Since the 1980s, there began a multi-decade trend of abundant growth, lower inflation & wages, and increasing inequality in the world.  It was led by baby-boomers getting added to the working population in 1970s and Russia and China doubling global work force in 1990s. This led to an increase in total production and put disinflationary pressure on global economy. China became the production powerhouse of the world, but Chinese financial markets were not integrated with the world. This culminated in a fall in investments as a percentage of savings in developed markets, lowering real interest rates. China kept its domestic real interest rates low, boosting domestic investment and leading to unequal investments in the world.

Wages were set by China hence developed markets wages kept falling towards the new equilibrium. As capex fell and labour force stayed stable, capital to-labour ratio fell, reducing productivity. Economists such as Larry Summers, Rogoff and Gordon expect secular stagnation over few years due to excess capacity leading to output gap, debt super cycle de-leveraging and decline in population growth. Manoj expects a divergence since excess capacity is an issue only with China and Korea unlike US, EU and Japan. Also debt levels in most emerging markets are low, and they can cut real interest rates to boost production.

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Since global interest rates are set by US and EU, Manoj believes that real interest rates would start inching higher and so will inflation. Wages will rise once again as ageing population will reduce workforce. Corporates will replace labour costs with capital, increasing productivity. This will reduce global inequality. Rising real interest rates would also push asset prices lower.

While taking audience’s questions Manoj opined that every economy, which has escaped poverty, has accumulated capital when population growth was strong.  India will benefit at the cost of China since Chinese consumption would fall, with a fall in capex, similar to Japan. India will have abundant low hanging fruit in the direction of productivity and prosperity.

  • KS

 

PS:

For the complete coverage of #IndiaInvConf (for India Investment Conference 2016) kindly click on the links to the posts on the WordPress or search under the tab “India Investment Conference”:

#IndiaInvConf – India Investment Conference: Strategies For An Emerging Environment

#IndiaInvConf – Inaugural Address By Jayesh Gandhi CFA, President IAIP and Senior Portfolio Manager Birla Sun Life AMC

#IndiaInvConf – Opening Address By Sunil Singhania CFA, Member Board of Governors CFA Institute and CIO Equity Investments Reliance Mutual Funds

#IndiaInvConf – Global Asset Allocations: Investment And Business Themes For 2016 And Beyond – A CIO’s Perspective

#IndiaInvConf – The Aspirational Investors: Investing In The Pursuit Of Wealth And Happiness

#IndiaInvConf – Other People’s Money: A Lean Financial Services System Can Better Adapt To The Needs Of The Economy

#IndiaInvConf – The Corporate Life Cycle – Lessons For Investors

#IndiaInvConf – Multi-Asset Investing: A Practitioner’s Framework

 

You could also read tweets by typing #IndiaInvConf, @iaipcfa, @CFAIndia, @CFAAsia, @CFAInstitute

About IAIP

India Association of Investment Professionals (IAIP), which is established April 2005 and located in Mumbai, is an association of local investment professionals. As one of the 136 CFA Institute member societies, IAIP connects members to a global network of investment professionals. Consisting of portfolio managers, security analysts, investment advisors, and other financial professionals, IAIP promotes ethical and professional standards within the investment industry, facilitates the exchange of information and opinions among people within the local investment community and beyond, and works to further the public’s understanding of the CFA designation and investment industry.
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5 Responses to #IndiaInvConf – Global Economic Outlook: Why the Next 30 Years Will Look Nothing Like The Last 30

  1. Pingback: #IndiaInvConf – Global Asset Allocations: Investment And Business Themes For 2016 And Beyond – A CIO’s Perspective | Indian Association of Investment Professionals

  2. Pingback: #IndiaInvConf – Opening Address By Sunil Singhania CFA, Member Board of Governors CFA Institute and CIO Equity Investments Reliance Mutual Funds | Indian Association of Investment Professionals

  3. Pingback: #IndiaInvConf – Inaugural Address By Jayesh Gandhi CFA, President IAIP and Senior Portfolio Manager Birla Sun Life AMC | Indian Association of Investment Professionals

  4. Pingback: India Investment Conference (#IndiaInvConf) – Strategies for an Emerging Environment | Indian Association of Investment Professionals

  5. Pingback: Insights from India: Opportunities, Aging Gracefully, and Averting Crises

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