Latest news with #ChetanAhya
Time of India
5 days ago
- Business
- Time of India
How is India benefiting from supply chain diversification away from China? Morgan Stanley's Chetan Ahya explains
Chetan Ahya , Chief Asia Economist, Morgan Stanley , says India is gaining advantage due to tariff differences with China. American companies are considering increased imports from India. Government policies are boosting manufacturing and exports. Electronics manufacturing is expanding beyond mobile phones. Infrastructure development will further strengthen India's manufacturing exports. Optimism in Indian equity markets aligns with positive economic fundamentals. The organization maintains a bullish outlook on India. You have often talked about India's capex cycle and that you see it picking up. How do you see it shaping up and the kind of divide between private and government capex evolving? Chetan Ahya: We think that the government capex has been the key anchor of the capex cycle and to the extent to which India has been embarking on this focus on manufacturing capex, the government's focus on infrastructure would be an important anchor to that private capex eventually improving as well. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Signature Global SPR, Luxury Living in Sector 71, Gurgaon Signature Global Book Now Undo Right now, it is still the government capex and we had seen a bump down or a small slowdown period for government capex post general elections last year. But we have seen that in the last three-four months, there has been a meaningful pick up in government capex. In March, we saw that both central and state government capex growing at a very high pace and that has now taken the 12-month trailing centre plus state combined capital expenditure to close to the peaks that we had seen right before the general election. We have seen this strength in government capex coming back again. As far as private capex is concerned, we were expecting that would have picked up a lot more by this time, but to the extent to which we have seen this trade tensions emerge from early this year that is going to affect the capex outlook not only in the region, but also in India, despite the fact that India has lower exposure to global goods cycle. The reality is that it still has a meaningful exposure of 12% of GDP being its goods exports to GDP. We are expecting private capex to be going through a bit of an adjustment period in the environment of global trade tensions and then, over the next calendar year, that is, in 2026, we should see a pick up in private capex because by that time, the damage out of this global trade tensions would have been behind us. Live Events Talk about the China angle here and to what extent is India benefiting from the supply chain diversification away from China because this is something that has come up time and again for many years now. Chetan Ahya: India is benefiting on account of it. Right now, during a period where tariffs on China, even after having come down, are still at a very high run rate of 30% and from the 2018 period, you also have about 11% weighted average tariff on imports from China that the US has imposed. Cumulatively, we still have a 41% tariff rate for import from China for the US and that does give some sectors an advantage over China in terms of pricing and even sort of thinking about a bit more from a medium-term perspective. The corporate sector in America is beginning to think about importing more from India. India is probably benefiting on account of that. Then, from a medium-term perspective, we have always argued that look, it is not just about taking away market share from China, but just getting rightful market share for India in the global goods exports and for that India's policies that were important and the government has been taking the right policies to boost that manufacturing sector exports. We have seen electronics manufacturing getting a leg up. We are going to see that expand into more and more products within the electronic segment apart from mobile phones and laptops. And at the same time, we think that from a medium-term perspective, this whole push towards infrastructure will really strengthen India's manufacturing exports. It is really a lot of the domestic policies that will be important from the long term apart from the short-term benefit that it may get on account of differential tariff rates between India and China. Do you think the current optimism in the Indian equity markets is aligned with your view when it comes to economic fundamentals or do you see any areas with overheating or correction risk? Chetan Ahya: Both our regional and India strategists have been very constructive on India. So, we are aligned up as a house on being bullish on India.
Time of India
02-05-2025
- Business
- Time of India
India doing well on a relative basis, but can't escape growth slowdown due to tariff tantrum: Chetan Ahya
Chetan Ahya , Chief Asia Economist, Morgan Stanley , says India's economic growth is projected to slow down to 5.7% in Q4 due to global trade tensions, despite its relatively strong position. The country's higher dependence on domestic demand and a resurgence in government spending will provide crucial support. However, the impact of weaker external demand will inevitably moderate India's overall growth trajectory. What high frequency indicators are you monitoring closely because one of your reports highlight that there has already been a sharp decline in the US-China trade activity – about 33% year-on-year – in the cargo carrying container ships. How reliable are these high frequency indicators when things are so much in flux right now? Chetan Ahya: There is a lot of uncertainty around the reliability of that data because like for example you mentioned about the container traffic, but we also look at this data on shipping activity which is called port calling data. It is the number of ships at the port in and out loading and unloading, that data is actually showing that for India and Asia ex-China there has been quite a nice rebound in that shipping activity. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Join new Free to Play WWII MMO War Thunder War Thunder Play Now Undo Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Asia ex-China, in aggregate is growing at about 5% year-on-year that is where it was before April 2 tariffs. So, during the period immediately after the April 2 tariffs, it came down quite sharply, but it is now back up. I would caution against that number saying that everything is back to normal because there is a large amount of blank shipping or empty ships that have been moving around and that data is available separately, that number has gone to a new high right now. Also, we do not know the capacity utilisation within ships. So, I would just be a bit careful about thinking that everything is back to normal. Also, from a framework perspective, eventually there will be a negative effect of this capex showdown. In 2018-19, from the time the tariffs were imposed, it took about four months for it to show up in the hard data which is the capex data. For tracking capex, we will be using monthly capital goods imports data that comes out from the trade data in Asia and as you know Asia trade data comes out much earlier than US and Europe. We think that could be a nice live barometer of what is happening in the capex cycle and so for the month of April, we will know the data by the middle of May. Similarly, in May, we will know by the middle of June. But our current assessment is the June hard data point considering that it will be four months from the time tariffs would have been imposed should show that meaningful slowdown in capex data. Live Events You Might Also Like: How will US-China trade tensions impact global corporate capex & Asia's GDP growth? Chetan Ahya answers Other than central bank action which we have already seen in terms of rate easing and even the liquidity push to the banking system from the central bank, what other tools do you think the government has currently available to try and pump up the economy? Chetan Ahya: From the central bank perspective, tariffs are deflationary to the extent to which it is slowing down global trade. Global commodity prices have also softened and it will affect capacity utilisation in India and the manufacturing sector across the region. So, there will be disinflationary pressures emanating from the region. There will be domestic disinflationary pressures because of decline in capacity utilisation. It is relatively easy for the central bank now and we had some supply constraints on the food sector and food inflation was high and that has also now come back below 4%. We think that the central bank will be able to take adequate monetary easing to support growth. We are expecting that the central bank will take up liquidity injections. It will cut interest rates and as it has already started to do, it will take up some more regulatory easing as well. So, on all three fronts, you should expect the central bank to take action. From the government side, my personal preference would be that they defer the consolidation of the deficit. Right now, we are still building in fiscal consolidation because that's what the finance minister has repeated, but to the extent to which there will be some loss of revenue with growth slowdown. If the government decides to be on the consolidation path, it will have to come out at the cost of reducing expenditure or expenditure growth. It would be better to keep capital expenditure growth strong to offset this downside pressure from external demand slowdown and potentially private capex slowdown. You have warned of potential spillovers, such as weaker job creation, suppressed consumption and interestingly and intriguingly, banking sector risk aversion as well. Which Asian economies – and if you think India is also part of that pool – are most at risk of these non-linear effects and how might they manifest themselves in the latter part of the year. Chetan Ahya: In general, the approach that we have taken is to just look at goods exports to GDP because as I mentioned earlier it is not about bilateral issues that any country has with the US, there is going to be a global capex slowdown, there is going to be a global trade slowdown. So, the best parameter to watch would be who is more exposed to global goods exports. Therefore, we look at exports to GDP ratios and on that parameter India has the lowest goods exports to GDP at 12% and some of the mid and smaller size economies in the region which is the likes of Korea, Taiwan, Thailand, Malaysia they will be relatively more exposed. You Might Also Like: Biggest call is to conserve money and stick to old warhorses like banks: Dinshaw Irani China's goods exposed to GDP is at a moderate level at 20%. But China has a very high dependence on net exports for its GDP growth. For instance, in the first quarter of this year, they just reported that 40% of their growth came from net exports. Last year, in the fourth quarter, 45% of their growth came from net exports. We overlay exports to GDP ratio with the dependence on net exports. And since India is running a modest current account deficit, it is less reliant on net exports as well as a big driver to growth whereas China will add to that list of economies which will face significant downside pressures in this environment of trade tensions. You have also talked about a quick resolution of tariff uncertainty and that could bring upside risk to the growth outlook as well. Tell me what a quick resolution is going to look like in terms of timelines and tariff reductions and how much could it boost Asia's GDP growth in 2025. Chetan Ahya: We were building in some slowdown, but we have additionally cut growth rates by about 50 to 70 basis points depending upon the economy in the region on account of these last round of trade tensions which were basically taken up on April 2nd. If you now see a complete reversal of that in the next four to six weeks, as I was mentioning earlier, you could go back to the original path that we were forecasting, but it is still going to be very optimistic to assume that there is going to be a complete reversal and in four to six weeks' time we are back to where we were before April 2nd. You just highlighted how India is still isolated and cocooned from the impacts of tariff implementation. It seems that India perhaps could be the first country that there could be a tariff handshake on when it comes to the US. What is your standalone view on how India's economy has been? What has the Reserve Bank of India been doing in trying to combat and control inflation at the same time try and instill growth as well? Chetan Ahya: We think India is doing well on a relative basis, but on an absolute basis everybody is going to take some pain and as I mentioned for India, we are building in a 50 bps growth slowdown from 6.2% on a quarterly trajectory to 5.7% over the Q4 period. That is going to be still something that cannot be avoided because India is still sitting in this world connected with the rest of the world. The part that is good in India is that there is a structurally higher dependence on domestic demand versus external demand and at the same time there was a bit of a blip in the government spending because of elections last year that has come back. The support from government spending is going to be quite critical in this environment and hopefully, we do not see a compromise on those target numbers that were laid out in the budget on capital expenditure. So, India's domestic demand dependence is high and that is on a structurally higher path and that is going to be an offset but net-net because of this challenge on external demand from trade tensions, India's growth will also moderate. You Might Also Like: Can India thrive purely on domestic growth amid global tariff turmoil? Sanjay H Parekh explains
Economic Times
02-05-2025
- Business
- Economic Times
India doing well on a relative basis, but can't escape growth slowdown due to tariff tantrum: Chetan Ahya
Chetan Ahya, Chief Asia Economist, Morgan Stanley, says India's economic growth is projected to slow down to 5.7% in Q4 due to global trade tensions, despite its relatively strong position. The country's higher dependence on domestic demand and a resurgence in government spending will provide crucial support. However, the impact of weaker external demand will inevitably moderate India's overall growth trajectory. ADVERTISEMENT What high frequency indicators are you monitoring closely because one of your reports highlight that there has already been a sharp decline in the US-China trade activity – about 33% year-on-year – in the cargo carrying container ships. How reliable are these high frequency indicators when things are so much in flux right now? Chetan Ahya: There is a lot of uncertainty around the reliability of that data because like for example you mentioned about the container traffic, but we also look at this data on shipping activity which is called port calling data. It is the number of ships at the port in and out loading and unloading, that data is actually showing that for India and Asia ex-China there has been quite a nice rebound in that shipping activity. Asia ex-China, in aggregate is growing at about 5% year-on-year that is where it was before April 2 tariffs. So, during the period immediately after the April 2 tariffs, it came down quite sharply, but it is now back up. I would caution against that number saying that everything is back to normal because there is a large amount of blank shipping or empty ships that have been moving around and that data is available separately, that number has gone to a new high right now. Also, we do not know the capacity utilisation within ships. So, I would just be a bit careful about thinking that everything is back to normal. Also, from a framework perspective, eventually there will be a negative effect of this capex showdown. In 2018-19, from the time the tariffs were imposed, it took about four months for it to show up in the hard data which is the capex data. For tracking capex, we will be using monthly capital goods imports data that comes out from the trade data in Asia and as you know Asia trade data comes out much earlier than US and think that could be a nice live barometer of what is happening in the capex cycle and so for the month of April, we will know the data by the middle of May. Similarly, in May, we will know by the middle of June. But our current assessment is the June hard data point considering that it will be four months from the time tariffs would have been imposed should show that meaningful slowdown in capex data. Other than central bank action which we have already seen in terms of rate easing and even the liquidity push to the banking system from the central bank, what other tools do you think the government has currently available to try and pump up the economy? Chetan Ahya: From the central bank perspective, tariffs are deflationary to the extent to which it is slowing down global trade. Global commodity prices have also softened and it will affect capacity utilisation in India and the manufacturing sector across the region. So, there will be disinflationary pressures emanating from the region. There will be domestic disinflationary pressures because of decline in capacity utilisation. It is relatively easy for the central bank now and we had some supply constraints on the food sector and food inflation was high and that has also now come back below 4%. ADVERTISEMENT We think that the central bank will be able to take adequate monetary easing to support growth. We are expecting that the central bank will take up liquidity injections. It will cut interest rates and as it has already started to do, it will take up some more regulatory easing as well. So, on all three fronts, you should expect the central bank to take action. From the government side, my personal preference would be that they defer the consolidation of the deficit. Right now, we are still building in fiscal consolidation because that's what the finance minister has repeated, but to the extent to which there will be some loss of revenue with growth slowdown. If the government decides to be on the consolidation path, it will have to come out at the cost of reducing expenditure or expenditure growth. It would be better to keep capital expenditure growth strong to offset this downside pressure from external demand slowdown and potentially private capex slowdown. ADVERTISEMENT You have warned of potential spillovers, such as weaker job creation, suppressed consumption and interestingly and intriguingly, banking sector risk aversion as well. Which Asian economies – and if you think India is also part of that pool – are most at risk of these non-linear effects and how might they manifest themselves in the latter part of the year. Chetan Ahya: In general, the approach that we have taken is to just look at goods exports to GDP because as I mentioned earlier it is not about bilateral issues that any country has with the US, there is going to be a global capex slowdown, there is going to be a global trade slowdown. So, the best parameter to watch would be who is more exposed to global goods exports. Therefore, we look at exports to GDP ratios and on that parameter India has the lowest goods exports to GDP at 12% and some of the mid and smaller size economies in the region which is the likes of Korea, Taiwan, Thailand, Malaysia they will be relatively more exposed. China's goods exposed to GDP is at a moderate level at 20%. But China has a very high dependence on net exports for its GDP growth. For instance, in the first quarter of this year, they just reported that 40% of their growth came from net exports. Last year, in the fourth quarter, 45% of their growth came from net exports. We overlay exports to GDP ratio with the dependence on net exports. And since India is running a modest current account deficit, it is less reliant on net exports as well as a big driver to growth whereas China will add to that list of economies which will face significant downside pressures in this environment of trade tensions. ADVERTISEMENT You have also talked about a quick resolution of tariff uncertainty and that could bring upside risk to the growth outlook as well. Tell me what a quick resolution is going to look like in terms of timelines and tariff reductions and how much could it boost Asia's GDP growth in 2025. Chetan Ahya: We were building in some slowdown, but we have additionally cut growth rates by about 50 to 70 basis points depending upon the economy in the region on account of these last round of trade tensions which were basically taken up on April 2nd. If you now see a complete reversal of that in the next four to six weeks, as I was mentioning earlier, you could go back to the original path that we were forecasting, but it is still going to be very optimistic to assume that there is going to be a complete reversal and in four to six weeks' time we are back to where we were before April 2nd. You just highlighted how India is still isolated and cocooned from the impacts of tariff implementation. It seems that India perhaps could be the first country that there could be a tariff handshake on when it comes to the US. What is your standalone view on how India's economy has been? What has the Reserve Bank of India been doing in trying to combat and control inflation at the same time try and instill growth as well? Chetan Ahya: We think India is doing well on a relative basis, but on an absolute basis everybody is going to take some pain and as I mentioned for India, we are building in a 50 bps growth slowdown from 6.2% on a quarterly trajectory to 5.7% over the Q4 period. That is going to be still something that cannot be avoided because India is still sitting in this world connected with the rest of the world. The part that is good in India is that there is a structurally higher dependence on domestic demand versus external demand and at the same time there was a bit of a blip in the government spending because of elections last year that has come back. The support from government spending is going to be quite critical in this environment and hopefully, we do not see a compromise on those target numbers that were laid out in the budget on capital expenditure. So, India's domestic demand dependence is high and that is on a structurally higher path and that is going to be an offset but net-net because of this challenge on external demand from trade tensions, India's growth will also moderate. (You can now subscribe to our ETMarkets WhatsApp channel)
South China Morning Post
29-04-2025
- Business
- South China Morning Post
Hong Kong stocks rise as investors await earnings from HSBC, ICBC, China Construction Bank
Hong Kong stocks rose on Tuesday, as traders kept an eye on the latest developments in the US-China tariff talks and corporate results to assess the impact of the ongoing trade war. Advertisement The Hang Seng Index added 0.4 per cent to 22,063.94 as of 9.47am local time. The Hang Seng Tech Index added 0.8 per cent. On the mainland, the CSI 300 Index and the Shanghai Composite Index both slipped 0.1 per cent. Chinese biotech firm WuXi AppTec rose 4.6 per cent to HK$60.90 after net income beat analysts' estimates, CSPC Pharmaceutical Group added 3.8 per cent to HK$6.27. Alibaba Health Information Tech advanced 2.4 per cent to HK$4.72, while port operator CK Hutchison Holdings gained 2 per cent to HK$43.95. On the flip side, Chinese sportswear maker Li Ning dropped 2 per cent to HK$14.70 after it reported a low-single-digit increase in first-quarter same-store sales. China Petroleum and Chemical (Sinopec) declined 1.5 per cent to HK$3.88, while electric-vehicle maker BYD eased 1.1 per cent to HK$377.00. US Treasury Secretary Scott Bessent said on Monday that it was up to China to take the first step in de-escalating the tariff fight with the US. The comment came after a Chinese foreign ministry spokesman denied any recent consultations or negotiations on tariffs between the two nations. Advertisement 'We believe talks will begin that will move tariff rates down,' Morgan Stanley economists led by chief Asia economist Chetan Ahya said in a note late on Monday. 'But a comprehensive deal takes time, so tariffs are likely to remain somewhat high.'
Bloomberg
08-04-2025
- Business
- Bloomberg
Asia Growth Drag From Tariffs Will Be More Than 2018-19: Morgan Stanley's Ahya
Morgan Stanley's Chetan Ahya says the latest round of tariffs will have a more damaging effect on Asia's growth than the 2018-2019 period. Ahya also adds that the Trump administration seems focused on reducing the US trade deficit with its Asian partners. He says this means it will "take some time" for Washington to negotiate deals to reduce levies. (Source: Bloomberg)
