Some question markets over high-value consumer demand in India. The latest Emerging Consumer Survey conducted by Credit Suisse saw India ranking top in consumer sentiments. However, most Indians are not optimistic about high-value items like homes, cars and electronic appliances. The share of people wanting to postpone large purchases has doubled from 16% to 32% YOY. That means the tough times for auto companies could continue in 2019. Most auto companies have already seen dipping sales with forced production cuts and this may just be the consumer side of the story.
A full-fledged economic slowdown appears to have spooked global markets and Wall Street also opened lower on Monday on global growth worries. In response to the weak performance by Europe and Japan, the US markets also opened on a weak note on Monday. With the China-US trade war showing no signs of relenting, Wall Street was preparing itself for a full-fledged slowdown in global GDP. The uncertainty surrounding BREXIT and the vulnerability of China’s trade engine have also left Wall Street worried. The inverted yield curve emerging in the US is becoming another cause for worry.
Even as the uncertainty over the BREXIT deal continues, Theresa May is putting up a last-ditch fight to save the BREXIT deal. Conservatives have called on May to quit and Parliament has tried to snatch her initiative on the Deal, May continued to be optimistic. Theresa May has underlined that “No Deal” was not an option, especially considering that the EU was now willing to give the UK more time to agree upon a deal. A “No Deal” could create chaos in markets and compress GDP by as much as 7%, as per the British central bank. The turmoil in the global financial market is also likely to be pronounced.
IMF’s Lipton has underlined that the China-US trade war could be the biggest threat to global stability. According to Lipton, the trade war between the US and China, which began 8 months back, could actually compress global growth by up to 40 basis points. The effects of the trade war are already visible in the GDP growth of the US and China. Lipton also noted that countries like Italy are especially vulnerable and that could also have an impact on global stability. The trade war, as in previous cases, has the potential to degenerate into a currency war with most countries ending up on the losing side.
Two of the principal global commodities reacted diversely to the threat of a global economic slowdown. Brent Crude slipped nearly 27 bps to $66.85/bbl on Monday. This was on top of a 120 bps fall in crude prices on Friday. The big concern for oil is not about shale or OPEC but about global economic growth. Most markets had interpreted the US Fed indication of “no rate hikes” in 2019 as a signal of weakening economic growth. In the meantime, gold prices in the global market gained on Monday after fears of a global slowdown began to spook investments in traditional equity and debt. Normally, gold sees a sharp rise in buying interest when a slowdown in growth looks likely; as is evident from the Fed outlook. Also, the US yield curve inverting could be increasing the tendency towards gold.
We can now expect a more organized approach to Fintech in India. The RBI is expected to launch new norms for the launch of Fintech products in 2 months and will put in place an appropriate supervisory mechanism to ensure that the new Fintech products do not create any systemic risks. Also, Fintech products need to be protected from mis-selling. RBI governor has spoken in terms of a regulatory Sandbox to reduce the time required for Fintech companies to take their ideas to market. The framework is expected within 2 months, which should be a boost to many Fintech plans of banks.
