Growth may cross 7.5% if reforms accelerate: Goldman

BENGALURU: The re-election of Prime Minister Narendra Modi with a massive mandate has been a major confidence booster for Goldman Sachs in India, both as an investor and as an allocator of capital, said its top executive, and hoped for the continuation of economic reforms.“Our base case on GDP growth is 7.5%,” said Goldman Sachs CEO David M Solomon in his first interview with Indian media. “If the reform programme accelerates there can be considerable upside in the GDP growth on a forward basis… Our growth will closely match that of the growth of the Indian economy.”In a freewheeling conversation with ET over video conference, Solomon spoke on a wide range of topics that impact global finance and corporates, touching upon issues as diverse as economic reforms in India, the timing of a possible global recession, the future path of US interest rates, global trade wars as well as the desirability of breaking up Big Tech firms like Facebook.The former chief operating officer of the bank, who took over last October from Lloyd Blankfein, the legendary risk titan, believes India is going to need significant amounts of capital — an area where the Wall Street bellwether can play a key role. “If you think about the continuing digitisation of the economy in India, obviously that’s going to create many opportunities.” The reforms process, if continued under the new government, will further accelerate FDI inflows, he said.Low Chance of Global Recession: SolomonThe new $250 million, 1.2 million square foot Bengaluru office, which was inaugurated last Thursday and will serve as a global centre supporting innovation, represents Goldman's confidence in India's longterm potential.The ongoing trade war between the US and China has opened up new opportunities as global supply chains are being tweaked as companies seek to reduce their dependence on China. However, based on interactions with top CEOs, he feels India might not be able to capitalise on it the way the US or Asian peers like Indonesia and Vietnam seem likely to.Solomon sees chances of a global recession in 2020 to be ‘low’.Despite long-term optimism, Solomon had one word of caution. “India is still a place where the regulatory impact on business slows economic growth.” An optimist who would rather unwind on the DJ console after a hard week’s work, he added, “I am hopeful that that progress will continue and accelerate.”Asked about changing regulatory goalposts in ecommerce and teething problems that hamper smooth implementation of new laws such as bankruptcy code, which in turn sends out mixed signals to global investors, Solomon argued that it is a commonplace practice around the world. “It’s par for the course when you are driving change in a major economy. While I am sure there are investors who are frustrated and want things to go quicker, we take a very long-term view… goal posts in any economy can keep shifting, including the US.”The changing regulatory environment around the world, especially surrounding technology and privacy issues, has also seen growing demand to split large technology companies like Facebook. Solomon, whose firm has a vice like grip on tech IPOs in the US, along with rivals Morgan Stanley, is against breaking them up.“Breaking up a company is a very, very difficult, complicated thing to do. Like any other business that becomes big and influential, Facebook will have to make adjustments,” he says. He does see chances of heightened government regulations “putting more rules, guard rails and parameters in place.”

from Economic Times http://bit.ly/2WfMI8u