Indian Economy, Challenges and Opportunities

Mr.Sengupta spoke to the students of MDAE on the 7 th of September 2019. Currently the Co Head and Economist, India research at the Bank of America Merrill Lynch, Mr Sengupta has also worked at the RBI for ten years as a staff economist and has severed as co convenor of the RBI’s Advisory Group on Insurance. Through the talk the students were provided with an insight into the role economists play in large banks while touching upon recent economic events both domestic and international.

In the first half of the talk Mr.Sengupta provided the class with a description of the various financial markets banks trade in, ranging from equity, fixed income, currency to commodities. He went on to elaborate on the two components of fixed income i.e the buy and sell side. For students aspiring to become economists the speaker went on to talk about the various types of research banks are involved in namely macro, equity and credit research. While elaborating on the aspects of macro research, which beyond report writing, Mr. Sengupta touched on the importance of ideation while emphasizing that a major part of research involves sales, i.e. pitching research reports and subscriptions to clients. Through this the students were provided with a clear picture of what to expect if they were to take up a role as an economic analyst in a bank, the speaker also touched upon the changing revenue models for sell side research, while adding that there has been no change in sales as a result of this.

The second half of the talk was a candid discussion about the current scenario of the economy. Mr.Sengupta praised some of the measures taken by the RBI and the government such as the Insolvency and Bankruptcy Code, the Prompt Corrective Action norms on Public Sector Banks with high NPAs as well as the recent RBI dividend given to the government. He attributed the 110-basis point interest rate cuts by the RBI to the slowdown seen in the world economy, a result of the US China trade war, as well as several domestic factors. These domestic factors include the liquidity crisis amongst NBFCs, unorderly and hasty implementation of the GST, along with reduced savings
seen amongst Indian households which have contributed to the slowdown in the auto, real estate and FMCG sector. Mr Sengupta pointed out that there is typically a 9-month lag before the rate cut transmissions are felt, as a result the present quarter is likely to see slow growth which is expected to pick up by Jan 2020.

The session concluded with Mr.Sengupta giving his expectations for the global economy. He believes that within the next 10-15 years Asia could become larger than most developed markets and in the light of the ongoing trade war, India has the potential to become a new manufacturing hub. The talk was deeply insightful, providing the students with an glimpse of what a career of an economist may entail, while also providing the class with a deeper understanding of the present economic climate.

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