ET Now GBS 2026: India’s long-term strategy bolsters global confidence
“Last August, S&P Global upgraded India’s credit rating from ‘BBB-‘ to ‘BBB’. This upgrade did not happen by chance,” he said at the ET Now Global Business Summit, noting that India’s post-pandemic expansion has been among the most consistent among all major economies.
“Our prospects remain strong in the medium term, thanks to structural reforms, entrepreneurial energy and a forward-looking approach to debt and development,” he said.
Pallec said India’s domestic bond market is gradually deepening through foreign index participation and increased private credit.
Foreign ownership in Indian government bonds stood at around 0.9% in 2023 and increased modestly following the inclusion of the JP Morgan index in June 2024, he said, adding that wider index participation could take foreign participation in India’s government bond market to 10%.
“This will enable the funds available to corporate debt issuers in India to almost triple as a percentage of nominal GDP by 2030,” he said.
Speaking on ‘The Price of Trust: How Credit Shapes the Global Economy’, Pallec said that the center of gravity of global GDP continues to shift eastward. “According to the IMF, India and China’s combined share of global GDP is expected to nearly double from 12 percent in 2010 to 22 percent in 2030. Emerging markets are expected to represent roughly two-thirds of global growth this year.” At a time when global uncertainties are increasing, there is transparency in many markets.
“These changes have two important long-term credit impacts. First, supply chains, tariffs and flexibility. Now growth costs, then insurance value,” he said, noting that the reorganization of supply chains and the increased use of tariffs and industrial policy are likely to put pressure on economic growth and profitability, especially for established players.
“In the short term, some of these pressures may be masked by tailwinds such as the artificial intelligence and data center investment boom. But this shakeout can also create opportunities for emerging players,” he said, adding that while there may be an upfront cost to building resilience, it can also be understood as a form of long-term insurance paid for quieter periods that are valued in more volatile ways.
“Second, regulatory cooperation may fragment further. This may not emerge as an immediate problem,” he said, noting that timely, decisive and coordinated policy responses could be vital when market stress hits. “And this uncertainty extends to new global regulatory challenges, including in emerging areas such as decentralized finance and private markets,” he said.
When trust weakens, policymakers face sharper trade-offs between strategic autonomy, financial soundness and economic development, Pallec said. “If trust is low, sometimes at economic or credit cost, strategic autonomy often prevails, even if such policies are justified,” he said, adding that institutional investors or governments often respond by either reducing gross exposures, moving away from or exiting certain relationships, each of which has a real cost, or reducing net exposures, hedging, insuring or seeking more coverage, often increasing the cost of capital and friction in the system.
Pallec said trust has not only decreased but also improved. “The decline in trust in some relationships increases the incentive to build trust elsewhere. And we can already see this dynamic in global trade,” he said, adding that trade continues to evolve but is constantly evolving. “
And it was developing long before the events of the last 12 months. Over time, we may see global capital markets and capital flows move in a similar direction. “When trust is fragile, diversity becomes vital,” he said.
