India’s neutral geopolitical position has played a beneficial role in attracting global investment, according to Claudio Irigoyen, head of global economics research at Bank of America. Irigoyen states that emerging markets, including India, could experience a “sweet spot” in the second quarter of 2024. He highlights the redirection of trade towards friendly countries, with China exporting less to the US, Europe, and Japan, and more to Belt and Road countries. India can benefit from this trend. Irigoyen also discusses the impact of higher global interest rates on emerging markets, suggesting that relief may come around the second quarter of next year if the US Federal Reserve begins cutting rates. However, he notes that the end of the hiking cycle is not enough to end the sell-off in US rates, and the beginning of an easing cycle is necessary. Irigoyen further explains the ongoing debate about increasing real rates in the US, attributing it mostly to fiscal policy rather than a productivity boom. He mentions that the US dollar’s appreciation is not as significant as it would be if the sell-off were driven by productivity growth. Irigoyen highlights China’s reduced willingness to finance the US fiscal deficit and Japan’s move towards policy normalization, which may result in less willingness to buy US treasuries. Overall, these factors contribute to the global patterns playing out in terms of trade, investment, and interest rates.
