NEW DELHI: The economic recovery that is under way is likely to get a boost in the New Year but global headwinds and the uncertainty created by the Covid surge in China will emerge as major roadblocks.
Amid the sharp slowdown in global growth, India has emerged as a standout nation and estimates show that growth is likely to be around 7% for 2022-23 riding on the momentum of robust domestic demand.
The economy has so far staged a smart recovery after the bruising impact of Covid waves. Several indicators have pointed to growth getting back on track. While the Reserve Bank of India (RBI) in its latest monetary policy review has cut its GDP growth forecast to 6. 8% for 2022-23, economists reckon that expansion will be around 7% — not a bad number amid the likely recession in many countries.
There are several challenges that may confront policymakers in the New Year. The first is the sudden development on the Covid front. The government has moved swiftly to take precautionary measures against the backdrop of the surge in China and some other countries. The solid track record on vaccination is expected to hold India in good stead but the situation in China will likely remain an uncertainty calling for strong vigil and deft navigation of the economy.
The prospects of recession in several countries will also be a major challenge for the country’s exports, which have already started losing momentum. But there are several positives that are likely to hold on their own. Domestic demand remains robust, the farm sector has remained resilient and consumption has shown signs of a revival after the reopening of contact-intensive sectors.
“India’s economy is relatively more insulated from global spillovers than other emerging markets. India is less exposed to international trade flows and relies on its large domestic market. India’s external position has also improved considerably over the last decade,” says a recent World Bank report.
The report, titled ‘Navigating the Storm’, finds that while the deteriorating external environment will weigh on India’s growth prospects, the economy is relatively well positioned to weather global spillovers compared to most other emerging markets.
Inflation, which had emerged as a major policy concern for India, now appears to be moderating with the latest data on retail and wholesale price inflation showing a sharp fall. This could mean less aggressive interest rate increases by the RBI. The Budget for 2023-24 to be unveiled in February is also likely to have measures to push growth and shield the economy from the global headwinds. Economists reckon that 2023 should be a year of consolidation and protecting growth amid global challenges and keeping a close watch for any unexpected storm.
“How resilient domestic demand is will have a significant bearing on how much we grow next year. The emergence of the new strain of Covid in China adds to the list of downside risks to the global economy such as high inflation, rising interest rates and the Ukraine conflict,” said D K Joshi, chief economist at ratings agency Crisil.
India will become the third economic superpower by 2037 and a $10-trillion economy by 2035, Centre for Economics and Business Research (CEBR), a leading London-based consultancy, has said. Published on Monday, the report said the world is moving towards recession.
However, over the next five years, the annual rate of India’s GDP growth is expected to average 6.4%, after which it is expected to grow at average 6.5% in the subsequent nine years.
“This growth trajectory will see India rise from fifth place on the World Economic League Table in 2022 to third in the global rankings by 2037,” it said.
According to the report, the pandemic had a particularly devastating effect in absolute terms and India had the third highest death toll globally, yet the economy bounced back.
“In 2035, we forecast that India will become the third $10-trillion economy. Although there are political factors that could hold India back, it has demographics on its side,” the report said.
The report also played down concerns over high inflation, saying it has remained lower than in most other large economies.
Much of India’s current inflation rate reflects higher food prices, an erratic item but one that also accounts for a larger share of the consumer basket than in any other G20 country, CEBR added.
India Monday proposed dovetailing climate action with sustainable development, making a clear bid to bring issues facing the emerging economies and the global south in sharp focus at the G20.
Kickstarting the discussions at the first meeting of G20 Sherpas under India’s presidency in Udaipur, India’s Sherpa Amitabh Kant pitched for working together through hope, harmony and healing to deal with the global challenges, with a focus on developing countries and the global south whose voice is often unheard.
He highlighted India’s initiatives such as Aadhaar, Unified Payments Interface (UPI) and direct benefit transfer that have helped lift a vast population above the poverty line.
Kant said India’s G20 Presidency will seek to advocate the priorities of the developing countries and the global south in addition to that of the partners of the grouping. “Our perspective is that we should have a win-win collaboration between all of us, developing countries, the global south, and advanced economies.”
“We need to build new approaches; this is a unique form of both the developed world and emerging economies. We need to build approaches to benefit the world on key global issues,” he said.
Kant said the issue notes on 13 working groups have already been circulated among the participants. The notes address concerns such as accelerated, inclusive and resilient growth, accelerating progress on sustainable development goals, particularly health and education, climate finance, technological transformation and digital public infrastructure.
“The Sherpas expressed strong support for India’s presidency and for the priorities that have been outlined. They felt that these priorities were not just ours but that of everybody. They felt that there was a pressing need to act on some of these important priorities,” India’s G20 Coordinator Harsh Vardhan Shringla told reporters after the discussions.
Shringla said India’s objective was to present its narrative on the global agenda and highlight developmental achievements, tourism potential and cultural heritage.
“Our priorities should become the global priorities. That is a substantive part of it,” he said.
On issues such as climate finance, food supply security, and energy prices, Shringla said these were the goals of every country and G20 can come together and do something about it.
An overview of the finance track and India’s priorities were presented to all delegates by Ajay Seth, secretary, Department of Economic Affairs, ministry of finance.
A recession is unlikely in the APAC region in the coming year, although the area will face headwinds from higher interest rates and slower global trade growth, Moody’s Analytics said on Thursday. In its analysis titled ‘APAC Outlook: A Coming Downshift’, Moody’s said India is headed for slower growth next year more in line with its long-term potential.
On the upside, inward investment and productivity gains in technology as well as in agriculture could accelerate growth. But, if high inflation persists, the Reserve Bank of India would likely take its repo rate well above 6 per cent, causing GDP growth to falter.
In August, Moody’s had projected India’s growth to slow to 8 per cent in 2022 and further to 5 per cent in 2023, from 8.5 per cent in 2021.
It said the economy of the Asia-Pacific (APAC) region is slowing and this trade-dependent region is feeling the effects of slower global trade. Global industrial production has remained “fairly level” since it peaked in February just prior to Russia’s invasion of Ukraine.
“China is not the only weak link in the global economy. The other giant of Asia, India, also suffered a year-to-year decline in the value exports in October. At least India relies less on exports as an engine of growth than does China,” Moody’s Analytics Chief APAC Economist Steve Cochrane said.
On the regional outlook, Moody’s said even though India, as well as other major economies of APAC region are expanding due to their own delayed reopening from pandemic-related shutdowns, the expected slowdowns in Europe and North America, along with China’s sluggish economy, will cause 2023 to be a slower year than 2022 for economic growth.
“That said, a recession is not expected in the APAC region in the coming year, although the area will face headwinds from higher interest rates and slower global trade growth,” Cochrane added.
In its World Economic Outlook released last month, the International Monetary Fund (IMF) had forecast global growth to slow from 6 per cent in 2021 to 3.2 per cent in 2022 and 2.7 per cent in 2023.
India has emerged as “a bright light” at a time when the world is facing imminent prospects of a recession, IMF chief economist Pierre-Olivier Gourinchas had said.
Reserve Bank of India Governor Shaktikanta Das said a synchronised tightening of monetary policy globally has progressively increased the risk of a hard landing, which is a recession to tame inflation. India, however, is differently placed.
The Governor was speaking about the rising inflation across the world and said that inflation in systemically important advanced economies turned out to be persistent rather than transitory.
The third shock emanated in the form of aggressive tightening of monetary policy by the US Federal Reserve, and subsequent unrelenting appreciation of the US dollar.
During the annual research conference of the Department of Economic and Policy Research (DEPR) of RBI in Hyderabad on Saturday, he said, “Spillovers to EMEs (emerging market economies), and to India, were in the form of capital outflows, depreciation pressures on currencies, reserve losses and imported inflation.”
The age-old research issues for emerging market economies like external sector sustainability assessment, feasible range of policy options to preserve sustainability, and analysis of their effectiveness have once again come to the forefront, more so because the nature and size of the spillover risk is very different now, according to the Governor.
Presenting some of the major policy challenges in recent years, he also spoke about how the research department of the RBI has responded to these challenges.
In the usual academic environment of a university or a research institute, the Governor said it was much easier to assess the impact of research done by the staff by aggregating data on published research output, downloads, citations, and impact factor to give authors and organisations a score.
In contrast, it is always hard to track in quantifiable terms the utility and impact of policy research undertaken in central banks, a major part of which is used internally and not published, he said and also appreciated the excellent work done by the DEPR in these turbulent times.
Domestic inflation, on the other hand, was brought down, averaging 3.9 per cent during the flexible inflation targeting regime (June 2016 to February 2020). The research issue then was what factors contributed to the decline in inflation, according to RBI Governor Shaktikanta Das.
The Governor said another important policy challenge was the uncertainty about the time it would take to complete the balance sheet repair process (or, the twin balance sheet problem of corporates and banks), and its ramifications for growth and financial stability.
Policy responses had to be swift and wide-ranging to contain the adverse effects on the overall macro-financial conditions as well as sectoral vulnerabilities, Shaktikanta Das said, adding that the first major challenge was data collection during the first wave of the pandemic, and the associated statistical break in data.
“During the second wave of the pandemic, which was more lethal, collecting information on sector-level stress became even more important for designing targeted policy interventions,” said the governor, adding that the crisis thus created the opportunity to explore and harness the power of Big Data, and strengthen direct feedback mechanisms while working from home.
Big data refers to data sets that are too large or complex to be dealt with by traditional data-processing application software.
India has the conditions in place for an economic boom fueled by offshoring, investment in manufacturing, the energy transition, and the country’s advanced digital infrastructure, Morgan Stanley said in a report.
These drivers will make it the world’s third-largest economy and stock market before the end of the decade, Morgan Stanley said in a report titled, “The New India: Why This Is India’s Decade”.
India’s GDP is likely to surpass $7.5 trillion by 2031, more than double current levels, making it the third-largest economy and adding about$500 billion per annum on an incremental basis over the decade, the report said.
India’s market capitalization will likely grow by over 11 per cent annually, to $10 trillion, in the coming decade.
“We estimate that manufacturing’s share of GDP will rise to 21 per cent by 2031, implying an incremental $1 trillion manufacturing opportunity,” the Morgan Stanley report said.
“We expect India’s global export market share to more than double to 4.5 per cent by 2031, providing an incremental $1.2 trillion export opportunity.”
India’s services exports will almost treble to $527 billion (from $178 billion in 2021) over the next decade.
The report estimates credit to GDP rises from 57 per cent to 100 per cent, implying compound annual growth in credit of 17 per cent over 10 years.
India’s per-capita income rises from $2,278 now to $5,242 in 2031, setting the stage for a discretionary spending boom.
The number of households earning in excess of $35,000/year is likely to rise fivefold in the coming decade, to over 25 million, the report said.
E-commerce penetration to nearly double from 6.5 per cent to 12.3 per cent by 2031, according to the Morgan Stanley report.
Internet users in India to increase from 650 million to 960 million, while online shoppers will grow from 250 million to 700 million over the next 10 years.
“Twenty-five per cent of incremental global car sales over 2021-2030 will be from India, and we expect 30 per cent of 2030 PV sales to be EVs,” the report said.
India should hit a major inflection point for the next residential property boom in 2030 — a confluence of high per-capita income, a mid-30s median age, and higher urbanization.
India’s workforce in the technology services sector to more than double from 5.1 million in 2021 to 12.2 million in 2031, leading to an increase in office absorption from 32-35 msf per annum to a run-rate of 45-50 msf over the next 5-10 years.
Healthcare penetration in India can rise from 30-40 per cent now to 60-70 per cent; implying 400 million new entrants to the formal healthcare system.
The defence budget ($18 billion) is growing steadily (10 per cent CAGR) — traditionally there has been large import dependence (about 60 per cent) but there is now a strong thrust towards local manufacturing.
Some $700 billion in energy investments over the next decade as India accelerates its energy transition, Morgan Stanley added.
India will be the world’s future talent factory as it will have 20% of the globe’s working population by 2047, said Bob Sternfels, CEO, McKinsey & Co. The firm’s 13th global leader added that it will not only be India’s decade, but India’s century, with all key elements in place – a large working population, multinational companies reimagining global supply chains, and a country leapfrogging at digital scale-to achieve something special not just for the Indian economy, but potentially for the world.
McKinsey plans a “disproportionate commitment” to India and that’s why its global board will be coming to the country in December, Sternfels said. The firm has 5,000 people in India, a number he wants to double to 10,000. In an exclusive interview with ET’s Vinod Mahanta, Sternfels talks about the India opportunity, the recent scandals that have hit McKinsey, the state of the global economy, inflation woes and the threat of deglobalisation. Edited excerpt:
The Indian economy seems to have weathered the pandemic fairly well, despite hitting a few rough patches in the last two years. How do you see India’s growth story unfolding in the context of a deceleration in global economic activity?
Many people have said that it’s India’s decade. I actually think it’s India’s century when we look at some of the raw ingredients here. India is the future talent factory for the world. By 2047, India would have 20% of the world’s working population. And with supply chains being reimagined, it has massive potential for India across all aspects of manufacturing. The third is digitisation. India has leapfrogged on the digital scale. All those are the raw materials to do something special for not only the Indian economy but potentially for the world.
So does that optimism translate into more investment in McKinsey India?
I’m bringing our global board here in December because we are going to make a disproportionate commitment to India. We are about 5,000 people in India now—both in India practice and global centres—and it’s my aspiration to get to 10,000. We are about 40% women today, and I want that to be 50%. We turn 100 in 2026, so my question is, what can we be in 2026 in India.
How has the McKinsey India practice performed during the pandemic years?
HSBC, the world’s local bank, would choose to operate as a full- service lender in select geographies such as the UK, and a corporate financier in most others, Noel Quinn, Group Chief Executive, tells MC Govardhana Rangan, Bodhisatva Ganguli and Joel Rebello. While a group of investors sought the bank’s restructuring to boost returns, Quinn believes recent rising incomes prove the lender’s current structure is adequate to help achieve the desired results. Edited excerpts:
How would you read Fed chairman (Jerome) Powell’s speech at Jackson Hole indicating big rate increases due to high inflation?
Clearly, there’s a major economic challenge for the world with the level of inflation where it is. And nobody’s quite sure as to whether inflation will start to cap out in the near term or will continue to rise. The question mark is on how much higher interest rates need to get to in order to manage the inflationary pressures. There will be a correction in the demand curve, because as inflation is starting to impact disposable income, I believe the demand side of the equation is going to start to soften. And maybe that will do some of the job of interest rates.
Some say that the withdrawal of QE (Quantitative Easing) poses a greater challenge for the markets.
I think QE needs to be withdrawn progressively. QE was brought in for a reason… first of all, for the global financial crisis, then brought in because of the COVID situation. And I think markets did need to see a level of normalisation emerge. And, therefore, it is right to progressively withdraw QE to return the markets to a more normal operating environment.
This is a time when rates would go higher and economies would contract. How is this going to play out in the financial markets?
It’s not equal all around the world. There are different market dynamics taking place in continental Europe, particularly at the moment with the impact of the Russia-Ukraine war, the energy supply challenges for Europe and the inflationary consequences of that. Contrast that to the Middle East which is a very different set of economic circumstances. If I contrast it here in India, the inflationary pressures in India are not as great as the inflationary pressures elsewhere in the world. So I think what you’re going to find is governments will adopt different interest rate policies to suit their particular part of the economy. You’re going to see more divergent economic policies emerge over the coming years.
In this divergence, who wins and who loses?
I think the big challenge for the economy at the moment is energy supply. Any country that has an energy supply problem has the potential to have a challenging time over the next few weeks or months. So, continental Europe has both an inflationary pressure and an energy supply problem. The UK, on the other hand, doesn’t have so much of an energy supply problem; it does have a significant energy inflation problem. And then the US, as I said, has less of a supply problem. But there is some inflationary pressure in the energy sector and the food sector as a consequence. I think India in particular, has a very strong, bright future ahead of it. It’s quite a stable economy, with manageable inflation, very strong growth prospects, and a stable political environment within India. And I think that fosters a very strong growth environment.
One of the big trends in the last few years has been de-globalisation…
I put it slightly differently; I call it re-globalisation. Supply chains are changing, they’re changing for a number of reasons. They’re changing, partly because of geopolitics. They’re changing partly because of resilience. COVID made people aware of their over dependence on any one source of supply. There is a longer supply cycle today. As a consequence, goods are on the water longer. And then the ticket price of trade has gone up. So with inflation, the invoice prices of goods are higher today than two years ago. We are seeing a significant growth in trade, but the supply chains are different.
There’s a strong belief here that India will benefit from a China plus one strategy. What are your thoughts?
Buyers are seeking more than one or two sources of supply, some of that supply will be scale further away from their home market; some of that supply will be near assured, in order to allow greater flexibility to manage supply demand implications of their market. So we have seen a significant amount of supply chain shift into the likes of Mexico, from Asia, but it’s not for the whole but for part of the supply chain. So, you have part of the supply chain within 24 hours, 48 hours of delivery to the US market. India can be a massive beneficiary of that and you have a good developing, growing market.
What should India do to get that?
To be an effective global supplier, you clearly need a large manufacturing capability. Now, for India, it’s how do you facilitate the creation of large scale manufacturing plants that can be built within reliable timescales that can be approved and brought to operational capacity within a reasonable timeframe. And in the past, some of the planning regulations, some of the approval processes were more cumbersome than they are today. And I think there’s progress being made in creating the environment for large scale manufacturing plants to be built. The second thing that you need for an effective supply chain is very efficient and effective logistics capability. Now I think India has all of the raw material that it needs because it’s got a significant supply of labour in order to be a supplier to the world.
What do these mean for HSBC’s India business?
When I was living in Hong Kong and I first came to India, I remember having a conversation with my team and said: I’d love you to be boringly consistent for the next 10 years. Now, my definition of boring was 15% per annum growth, maybe 20%. India is such a huge opportunity. It’s a market that does value relationship banking, and long-term dependable relationships. If you go back to our report and accounts, including all of our activities in India, last year, we reported a pre-tax profit of $1.11 billion. So it’s not a small business. We are constantly seeing PBT over the last few years growing by 10% per annum.
Do the geopolitical tensions between the West and others have any impact for a bank like yours?
We have been an international bank for 157 years, and geopolitics has changed very significantly in those years in many different ways and forms and will continue to. If you are an international bank, which is what we are, then you try and stay focused on finance. This year, our corporate clients in commercial banking have asked us to open bank accounts for them in other countries as they expand their operations. And that level of ask is up 13% in the first six months of this year. So despite the geopolitics and the challenge and economic circumstances, our customers are asking us to help them expand their businesses, not just with import-export.
HSBC has been reorienting businesses for some time now – selling a few as in the US and France, while adding in Singapore and India. What is your view of HSBC by 2030?
In the US, we sold mass market retail because we didn’t have competitive differentiation, but we do have competitive differentiation on wholesale banking. About 95% of our capital of America is now wholesale banking related. We are doing a very similar thing in continental Europe where we have agreed to sell our retail bank in France. That will mean the majority of our capital and balance sheet in Europe will be wholesale banking. But we are different in the UK, where we are a full-service bank – banking everything from start-ups and SMEs and students through to the top in private banking and large corporates.
The same is true of Hong Kong and Mexico. In the other markets in which we operate in, we are typically an international wholesale bank, banking clients in multiple geographies, and we’re an international wealth bank. There’s press commentary about our joint venture here in India, on the insurance side, about one of our joint venture partners. Our acquisition strategy now is very much aimed at growing our wealth, and insurance business, the broader definition of wealth, wealth products, insurance products and asset management, across Asia – with the four important pillars of India, Singapore, Hong Kong and China.
Some observers believe the problems in China’s real estate now are similar to what happened in the US in 2008. What is going to be the fallout of that on the global financial markets?
The commercial real estate market in China is coming through a massive policy correction that has caused a lack of confidence in international capital markets to provide capital for that sector. That policy correction is still underway and nobody can fully predict how it is all going to land and work out. My view is it will take two or three years before we fully understand the new policy framework and how financeable the new policy framework will be. We are working through with them but I don’t think it is going to be a quick solution. It is going to take time.
Chinese financial conglomerate Ping An has sought the breakup of HSBC.
We have dialogues with all of our shareholders. There has been press speculation that Ping An is keen for us to consider alternative structural options to create value enhancements. We have evaluated those options in the past. There has been speculation that we have been asked to consider partial separation or listing and other forms of structural change. The management team and the board are fully confident in the strategy we are currently pursuing. It’s the right one and the fastest and the safest route to higher returns, which you saw in our half-year results where we have upgraded our market guidance so that our return on tangible equity will be 12%-plus next year. The transformation we have embarked upon in the last two or three years has improved the operating leverage of HSBC by 400 basis points. A fundamental corporate restructuring of the holding structure of the group will lead to significant revenue de-synergies and cost de-synergies and massive uncertainties for the next three to five years with no certainty of getting any of these proposals approved by shareholders or regulators. We would require 25 regulators around the world to approve such a structure and we don’t believe it’s the right answer. We believe we are following the right strategy.
The Indian economy is progressively getting unlocked because of digitisation and simpler tax structure and is poised to reap the benefits of “re-globalisation” that is underway as companies alter supply lines to face the new geopolitical realities, said Noel Quinn, Group CEO of HSBC.
“India is progressively getting unlocked. India has all of the raw material that it needs because it’s got significant supply of labour in order to be a supplier to the world,” he said.
The world’s fifth largest economy has improved over the years in terms of ease of doing business as bureaucratic red tape has lessened and many reforms such as the goods and services tax has made compliance easier.
“The government policies that have been put in place in India over the past few years, whether it is the digitization of the economy, or simplification of the GST… all of that are making India a much more attractive market, much more attractive opportunity for India to be a supplier to the world,” he added.
HSBC joins the growing list of global banks which have reworked their emerging markets strategy due to tighter regulations post the global financial crisis and accelerating digitisation.
‘Markets Likely to Remain Volatile’ Citigroup recently sold its Asian retail franchise, and JPMorgan, Barclays and Deutsche have realigned their strategy to squeeze more from corporates as the Indian domestic retail market is being served by the nimbler HDFC Bank and ICICI Bank.
Quinn believes global trade is leading to ‘re-globalisation’ where multiple supply chains are springing up in many geographies rather than one or two which offered to be the cheapest. This ‘re-globalisation’ is being driven by geopolitics and Covid experience that exposed dependency on one or two suppliers.
Global financial markets are likely to remain volatile as central banks in different parts of the world take divergent routes to tame price pressures which are running at multi-decade highs causing some social unrest.
“There’s a major economic challenge for the world with the level of inflation where it is,” said Quinn. “There will be a correction in the demand curve, because inflation is starting to impact disposable income. I believe some of the demand side of the equation is going to start to soften.”
Recently Federal Reserve chairman Jerome Powell signalled that he’s on course for a third 75 basis points increase in interest rate and the European Central Bank also reiterated its commitment to raise rates to douse the inflation fire sweeping across the continent.
India is among the four pillars of the British bank’s redrawn growth strategy after years of adjustments.
“We certainly see India as an investment market… also China, Singapore, and Hong Kong,” said Quinn. “They are the four pillars of strong growth across all of Asia. And we’re investing in all of those four pillars.”
Companies and banks in India could feel the bite of rising rates and inflation, but rated firms are better cushioned to withstand the pressure, S&P Global Ratings said on Tuesday. It said that further hike in interest rates is on the cards as the inflation remains above the RBI’s upper tolerance limit of 6 per cent despite a 140 basis points increase in the policy rate in the current fiscal year.
“In a stress scenario we conducted, credit profiles will deteriorate for companies that account for 20 per cent of the outstanding debt analyzed. This is according to a stress test of more than 800 largely unrated companies in India, representing USD 570 billion in debt. Rated issuers are generally better cushioned to withstand rising rates and higher input costs,” S&P said in a report.
The US-based rating agency said it expects India’s continued strong economic growth to positively affect companies’ revenues.
S&P had in May cut India’s growth projections for the current fiscal year to 7.3 per cent from 7.8 per cent estimated earlier, on account of high oil prices, slowing exports, and high inflation. “… inflation is eroding the purchasing power of the poor because energy and food account for a chunk of their consumption basket. Despite this, there are factors supporting growth,” it said.
S&P said a normal monsoon will prop up agriculture production and help control food inflation. The rebound in contact-based services will also boost growth, especially as COVID-19 vaccination penetration improves and people learn to live with the virus.
“More rate rises are coming, in our view… Despite the 140 basis points rise in 2022 so far, policy rates are well below historical levels,” S&P said, adding it expects consumer inflation at 6.8 per cent for fiscal 2023.
S&P said India’s sound external position and growth momentum will offset the downside pressure on sovereign credit metrics. India faces a higher current account deficit this year, and external flows are weighing on the rupee’s exchange rate versus the dollar. It said the country’s external balance sheet remains sound with ample foreign exchange reserves and limited external sovereign debt.
“Large rated corporate credits, in general, have adequate cushion to withstand rising rates, widening credit spreads and increasing input costs. This is mainly due to the significant deleveraging and improvement in operating fundamentals over the past two years. “Most companies also do not need meaningful funding for capex or financing, shielding them from the increase in funding cost,” S&P said.