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Global uncertainty rising! India CEA V Anantha Nageswaran's advice to businesses, individuals - Maintain 'margins of safety'

Times Now logo Times Now 16-03-2023 ET Now Digital
global uncertainty rising! india cea v anantha nageswaran's advice to businesses, individuals - maintain 'margins of safety' © Provided by Times Now global uncertainty rising! india cea v anantha nageswaran's advice to businesses, individuals - maintain 'margins of safety'

In the last week, the global banking sector has spooked investors with first the collapse of Silicon Valley Bank and then the Credit Suisse crisis. Acknowledging that global uncertainty has been rising, Chief Economic Advisor V Anantha Nageswaran on Thursday said businesses and individuals should keep 'margins of safety' in fiscal, corporate and savings account planning.

He CEA pointed out that the global growth estimates of the International Monetary Fund (IMF) given in January look outdated and countries will have to watch what the developments in the US over the last week would do to confidence, bank lending growth and the subsequent chain effects.

IMF's January 2023 World Economic Outlook Update projects that global growth will fall to 2.9 percent in 2023 but rise to 3.1 percent in 2024.

However, after the collapse of SVB on March 10, Signature Bank, which lent mostly to crypto industry, was shut down by the regulators on Sunday after there was a run on their deposits.

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CEA Nageswaran, in his address at the Crisil India Outlook seminar, shared that uncertainty has been on a rising trend and has gone up a few notches in the last week. This is something which countries need to live with, not only this year but for the next year and beyond, he added.

The important thing to remember, according to him, is that when you are facing uncertain times, the key thing to do is to make sure that we have margins of safety in our operations, whether it is for corporates or for investors. The only guidance one can think of is to allow for margins of safety, whether it is in fiscal planning, corporate planning or household balance sheet or savings account planning.

In view of the recent developments, if the US Federal Reserve has to pause interest rate hike, it will be a wait and watch situation in terms of what happens to real interest rates in the US and what will that do to the US dollar, the CEA stated. "What implications it will have for emerging economies, which I believe will be mostly positive in one sense, that is, the pressure on their currencies will abate,” he said.

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Impact on India

While he underscored that it may be difficult to quantify the net effect of these developments on countries like India at the moment, the overall positives would be the implications it would have for global demand, for oil prices and for the US interest rates and the dollar. These will be mostly positive for us, he suggested.

Further, the CEA highlighted that India's GDP growth is expected to be 7 per cent in current fiscal.

He advised that one should not be overly optimistic talking about 8-9 per cent GDP growth in the current environment. "If you can achieve, sustain growth of 6.5-7 per cent or even 6.4-7 per cent in the next 7-8 years until the next decade, we would have done very well".

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