India is growing ‘too fast' for its own good, warned Macquarie's Viktor Shvets.
Rising twin deficits, wholesale prices and lack of supply-side reforms may lead India towards ‘stagflation', Shvets, who is the managing director and head - Asian strategy at the global brokerage, told BloombergQuint in an interview.
Key Challenges For Emerging Markets
Tightening liquidity conditions, volatility in the bond market and China are the three key challenges to emerging markets over the medium to long-term, he said.
Going forward, the U.S. dollar is likely to stabilise provided trade tensions relent. There are some very high quality domestic corporates in India, which many EMs don't have. So in the short-term, India will do well over the next 3-4 months but it may face difficulties over the long-term.Viktor Shvets, MD & Head - Asian Strategy, Macquarie
Emerging markets need lots of liquidity, low volatility and more reflation, and these factors may not be available six months later, he explained.
For India, a good thing is that it has a lot of trapped liquidity but the challenge is that it consumes much more than it invests.
A lot of the good companies in India are very expensive. That is the challenge. There is a lot of domestic exposure that foreign investors may like to have but it is pricey. That's what is holding them back.Viktor Shvets, MD & Head - Asian Strategy, Macquarie
Watch the full interview here:
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