India is witnessing the politico-economic effects of shifting too far to the left, said DBS Group chief executive officer (CEO) Piyush Gupta at the HT-MintAsia Leadership Summit in Singapore. “India’s problem is the problem of shifting too far left," Gupta said. “It killed business confidence, ruined animal spirits, and ended up killing the goose that allows you to distribute the goodies."
However, DBS continues to remain bullish about India. “Our bet on India is long-term…I think this will be one of the exponential curves. It is going to be slow, but we’re optimistic about what we can do as an international company. I’m hopeful that over the next five to seven years, we will be a much bigger player in India," Gupta said.
Asia, world’s marketplace
In Asia, nominal gross domestic product (GDP) growth is still 5-6%, compared with 2%, or less, in other parts of the world. And, according to Gupta, the Asia growth story is driven by its secular drivers and its own demand.
“Asia today is no longer the factory of the world, it is the marketplace. The reality is that Asia’s middle class is consuming—be it Bangkok, Jakarta, Beijing, New Delhi or Mumbai, you can see that people have the spending power."
Asia is also seeing massive wealth creation, and at a rapid pace. “Asia is generating its own demand," Gupta said, adding that huge infrastructure investments and growing regional trade are also propelling the Asia growth story.
The other weapons in Asia’s arsenal are its fast-paced digitization and its young demographics. But challenges remain—the most obvious is cyclical. “There are headwinds to growth. Certainly you’re going to see a sharp slowdown. You might even see a recession. Some of it is sentiment-driven because of US-China trade tensions, but to a large extent, it is driven by deleveraging in China and India, and [this] deleveraging is deliberate," he said.
In India, deleveraging is driven by high non-performing loan (NPL) ratio of banks and liquidity issues of NBFCs. “The high degree of corporate leverage is something to worry about. (But), Asia is far more resilient," Gupta said.
Global geopolitics to be game changer
“Asia prospered in the last 50 years because of a benign geopolitical environment… (but) the old economic model that we’ve lived with for 67 years is changing," Gupta said.
Besides, technology such as artificial intelligence (AI) will cause more disruption. “Think of the number of jobs Apple and Google create compared with the jobs that General Electric created, it is already a fraction. And if you add technology and AI on top of that, jobs and wages are going to be challenging. Besides, we’re living much longer. And, therefore, the requirement for money that one wants to retire with has increased."
The ensuing economic shift could either see wages go up or prices come down. Gupta predicts a global shift to the left as governments respond to these changes with bigger social safety nets, universal basic income or higher taxes.
“Taxes are going up everywhere whether you like it or not. This is the reality. Economics is going to shift left," Gupta said.
Role of banks
Banks will continue to play an important role, but banking will be disrupted by technologies such as blockchain and AI.
“Unless you really start thinking like a tech firm, you will not be willing to change," says Gupta.
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