India looks better placed in 2021 in the ‘Goldilocks’ environment

New Delhi, Oct 4 : India along with Indonesia and Philippines will be among the best placed economies in Asia as the region transitions from below-trend growth to a new “Goldilocks” phase in 2021.
According to US financial services house, Morgan Stanley this “Goldilocks” phase will be a combination of accelerating and above-trend growth, rising-to-trend inflation, and “big easy” policy.
Such macroeconomic trends would be somewhat reminiscent of 2003/04, 2005/07, 2009/10, and 2015/18, a favourable backdrop for Asia ex Japan.
In 2020, North Asia (China, Taiwan and Korea) has outperformed the rest of Asia ex Japan on growth, as they were first in, first out, owing to an effective Covid-19 institutional response. In 2021, this growth divergence is likely to narrow as growth in the rest of the region catches up.
“Indeed, we think India, Indonesia, and the Philippines look better placed in this “Goldilocks” environment. They benefit most from the Fed’s AIT given their savings deficit. Vaccine availability would also go further in reducing risk aversion. Their higher structural growth and the potential for them to be relative beneficiaries from supply chain relocation could also enable them to take bigger strides in the recovery path”, Morgan Stanley said.
“We expect 2021 to show the overall Asia ex Japan growth recovery being sustained and accelerating above-trend, amid a combination of sequential growth and low base effects”, it added.