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Morgan Stanley's Ruchir Sharma raps emerging markets for eleventh-hour fiscal reforms

Updated : November 01, 2019 06:34 AM IST

Ruchir Sharma, chief global strategist and head of the emerging markets equity team at Morgan Stanley Investment Management, on Thursday, criticised emerging markets for implementing last-minute economic reforms when it goes under stress.

Speaking to CNBC, Sharma said countries like India are reacting now to economic slowdown after being in denial for a long period of time that there was no slowdown.

Sharma said, "US Fed's framework or the general economist framework may be a bit outdated as it is focused on classic inflation in terms of consumer prices. However, it doesn't take into account of asset price inflation and that is where a lot of the excesses is where we have seen."

“About 14 percent of companies in the developed world are zombie companies. These zombie companies are defined as companies which don't even earn enough profit to pay their interest. So, they have to keep borrowing to keep alive, which they can do in only a very low-interest-rate environment,” he added.

On recession, Sharma said, “It is narrowly focused on the fact that inflation is under control, a bit below target so they can afford to take lots of risks. I don't think they are sufficiently taking into account of asset price inflation and that's why a couple of people on the board dissented because they are fearing that these financial imbalances are building."
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