India Risk of Squandering Demographic Prime: Baweja

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May 12 (Bloomberg) -- Bhanu Baweja, Head of EM Cross Asset Strategy at UBS Investment Bank, discusses record voter turnout in India and the impact of the current election on markets. He speaks with Manus Cranny on Bloomberg Television’s “On The Move.” (Source: Bloomberg)


How much of the potential for modi exceeding two power is already priced in?

Indian politics, great shape.

The turnout in this election has been massive.

This is a record turnout.

It has been largely free and largely fair.

That says good things about a nation.

That is where i think the good news ends.

Modi is priced in by the market.

They're expecting a majority.

You could get a rebound or a continued rise in the market in the short term.

You could see numbers improving in the short term as far as the macroeconomic numbers.

Whether this government is likely to revive the structural downtrend remains in question.

Manufacturing as a percentage of gdp has completely stalled in one of the -- india is that the risk of squandering and democratic ryan.

-- squandering its democratic prime.

We are missing the fact that large chunks of people from indian villages are not able to find employment in the manufacturing sector.

10-year note, that has a fiscal -- in your note, that has a fiscal impact.

Huge ramifications.

That is the fiscal albatross around your neck.

You need to reduce subsidies and move away from current expenditures.

When we speak about reform in india, we speak about retail.

Those issues are completely tangential.

The main issues are issues like the labor market.

Can you make it for -- easier for business to deal with labor?

That is what prevents scale.

You are concerned that even if he gets the majority, he will not focus on that and the immediacy?

The history of economics and politics of india has not addressed this main issue at all.

To be fair, in his interviews, the person presently in opposition has made some very sensible comments.

I am hoping that if he does come to power, we do see a change, but that is not a given.

That is the main reform that india needs.

The situation is so bad today in terms of the cycle.

The reels -- the real structural change is likely to come if we see a change in labor laws out there.

The rupee is on the move.

Our u.s. convinced -- are you as convinced in that kind of move?

This is foreign investors.

The domestic investors -- if we do see a market friendly government, you could see further -- the markets have a little further to run.

I do not think the risk abroad is to attract it for the rupee -- attractive for the rupee.

I do not think you can get much appreciation past 58. let's broaden our perspective.

Xi jinping said, it stopped getting carried away, get used to in new normal.

Emerging markets, the frenzy seems to have abated.

What happens in china has a significant impact in terms of the near asia story.

Chinese stocks have come off consistently this year.

The tear most -- the two most clear trends has been a decline in u.s. yield and a decline in volatility.

Both of these are great for emerging markets because they give them more time to reform.

To reduce their external deficits and two people to attract and refinance their debt -- external tufted -- external deficits and to be able to attract and refinance their debt.

If all a till it he begins to rise again, as we expect it will, we could, under pressure again.

At what point will they stabilize the property market?

The chinese have used stimulus, but it has not had much of an impact.

We have not seen a big improvement.

The difference between the stimulus today and the stimulus two years back is the property market is declining.

The property market is the most crucial sector of the chinese economy because it is about 50% of chinese gdp.

If that market is stalling, it is difficult to see strong economic growth in china.

Our the chinese policymakers able to revise the property market?

They cannot get too loose, because you may have a problem down the road.

It is a very tough balancing act.

I want to get some of your main calls.

It is fascinating in terms of china.

You have some broad calls in terms of emerging markets debt.

Local currency debt.

You have a pretty big call on the mexican peso.

We think it is a good asset class for the long haul.

We have seen lower returns in the long haul.

The last five years was the honeymoon period.

That is a process that i do not want to extrapolate.

We are seeing signs that the u.s. economy is coming back.

Inflation is at 1.1%. that will mean that that does not give you great return over the next six months.

It is in a better place than our em equities.

The bigger problem is that em equities.

Mexico is a place where investors have been long in debt.

I do not see any major problems in mexico in terms of major inflation.

It is a decent central-bank.

We do remain comfortable with mexico in terms of currency and debt and in terms of equities as

This text has been automatically generated. It may not be 100% accurate.


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