Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian economy: In second gear
Cyclical story: lower growth, higher inflation in FY12
India‟s growth environment has been facing major headwinds from both
domestic and global factors. Over the past few months, the four I's – higher
inflation, high interest rates, high input prices and a slowdown in investments –
have been weighing on the growth outlook, in our view. At the same time, recent
global developments like the US debt downgrade and evolving Euro debt
concerns have increased the uncertainty about the global outlook. In view of the
recent macroeconomic headwinds, we expect India‟s real GDP growth to
decelerate to 7.4% YoY in FY12 from 8.4% YoY registered in FY11.
Limited leeway to use policy stimulus to boost economy
Unlike in 2008, sticky inflation and already high fiscal deficit levels limit policy
makers‟ ability to stimulate the economy via countercyclical policy tools in the
event of global risk aversion and a sharp deterioration in the global economic
environment.
Some recovery in FY13 but 9% growth a distant dream
We expect India‟s GDP growth to recover to 7.9% YoY in FY13 from 7.4% YoY
estimated for FY12 hinging on the government taking steps to remove structural
and policy-related bottlenecks to revive business confidence. We expect inflation
to stay at 6-7%, well above the historical average of 5-5.5%. We believe that
India‟s GDP growth will be well below the five-year average (FY07-11) of 8.4%
and that the targeted 9% level will remain a dream. We think an enabling policy
environment and government‟s effort to push the investment cycle will be the key
growth drivers of a mild recovery in FY13. We expect growth to start recovering
in the June 2012 quarter. Any meaningful pickup in investment may only be
visible towards the last quarter of 2012. One key factor: from both a capital flows
and exports perspective, the global growth environment remains an uncertainty.
Second wave of reforms
While a lot has been discussed about big-bang policy reforms, there has been
little progress on it over the past few years. Of interest, after policy inaction in the
wake of graft-related investigations regarding various issues, the policy tone on
reforms is turning incrementally positive. The government‟s Economic Advisory
Council (EAC) called for strong political leadership to push through muchneeded
reforms. The recent anti-corruption legislation movement led by social
activist Anna Hazare is itself the kind of revolution that the country has never
witnessed. There is a long list of pending structural reforms that we believe are
critical for India‟s growth cycle to accelerate.
Structural growth drivers remain intact
We believe favourable structural drivers for India to achieve sustainable GDP
growth of 8% remain intact over the medium term. India is poised to benefit from
the virtuous cycle of favourable demographic dividends, boosting savings and
thus higher investment and higher economic growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Indian economy: In second gear
Cyclical story: lower growth, higher inflation in FY12
India‟s growth environment has been facing major headwinds from both
domestic and global factors. Over the past few months, the four I's – higher
inflation, high interest rates, high input prices and a slowdown in investments –
have been weighing on the growth outlook, in our view. At the same time, recent
global developments like the US debt downgrade and evolving Euro debt
concerns have increased the uncertainty about the global outlook. In view of the
recent macroeconomic headwinds, we expect India‟s real GDP growth to
decelerate to 7.4% YoY in FY12 from 8.4% YoY registered in FY11.
Limited leeway to use policy stimulus to boost economy
Unlike in 2008, sticky inflation and already high fiscal deficit levels limit policy
makers‟ ability to stimulate the economy via countercyclical policy tools in the
event of global risk aversion and a sharp deterioration in the global economic
environment.
Some recovery in FY13 but 9% growth a distant dream
We expect India‟s GDP growth to recover to 7.9% YoY in FY13 from 7.4% YoY
estimated for FY12 hinging on the government taking steps to remove structural
and policy-related bottlenecks to revive business confidence. We expect inflation
to stay at 6-7%, well above the historical average of 5-5.5%. We believe that
India‟s GDP growth will be well below the five-year average (FY07-11) of 8.4%
and that the targeted 9% level will remain a dream. We think an enabling policy
environment and government‟s effort to push the investment cycle will be the key
growth drivers of a mild recovery in FY13. We expect growth to start recovering
in the June 2012 quarter. Any meaningful pickup in investment may only be
visible towards the last quarter of 2012. One key factor: from both a capital flows
and exports perspective, the global growth environment remains an uncertainty.
Second wave of reforms
While a lot has been discussed about big-bang policy reforms, there has been
little progress on it over the past few years. Of interest, after policy inaction in the
wake of graft-related investigations regarding various issues, the policy tone on
reforms is turning incrementally positive. The government‟s Economic Advisory
Council (EAC) called for strong political leadership to push through muchneeded
reforms. The recent anti-corruption legislation movement led by social
activist Anna Hazare is itself the kind of revolution that the country has never
witnessed. There is a long list of pending structural reforms that we believe are
critical for India‟s growth cycle to accelerate.
Structural growth drivers remain intact
We believe favourable structural drivers for India to achieve sustainable GDP
growth of 8% remain intact over the medium term. India is poised to benefit from
the virtuous cycle of favourable demographic dividends, boosting savings and
thus higher investment and higher economic growth.
No comments:
Post a Comment