5 Mar 2015
Indian economy in a sweet spot – GS
FXStreet (Barcelona) - The Goldman Sachs Team explains that the weak commodity prices, ongoing recovery and the structural reforms by the new government suggests that the Indian economy is moving in the positive direction.
Key Quotes
“We think that India’s economy is in a sweet spot given the correction in macro imbalances, weak global commodity prices, structural reforms by the new government and the cyclical recovery that is in progress.”
“We expect investment demand to pick up gradually in FY2016 (beginning April 2015) as the government increases capital spending and financial conditions ease further. Indeed, the government’s budget announced on February 28 projects a large increase in capital spending, especially on infrastructure.”
“We forecast that CPI inflation will remain contained in 2015 given soft commodity prices, and that the RBI will be able to meet its January 2016 target of 6%.”
“After the surprise rate cut on March 4, we think the RBI will ease less than current market expectations. Given uncertainties around commodity and food prices, greater fiscal impulse from the budget, and the need to build credibility around the new inflation targeting framework, the RBI will likely prefer to err on the side of caution, in our view. We think the risk-reward is in favour of the RBI staying on hold through 2015.”
“We continue to expect a trade-weighted appreciation of the INR, due to a shrinking current account deficit and large capital inflows, especially FDI.”
Key Quotes
“We think that India’s economy is in a sweet spot given the correction in macro imbalances, weak global commodity prices, structural reforms by the new government and the cyclical recovery that is in progress.”
“We expect investment demand to pick up gradually in FY2016 (beginning April 2015) as the government increases capital spending and financial conditions ease further. Indeed, the government’s budget announced on February 28 projects a large increase in capital spending, especially on infrastructure.”
“We forecast that CPI inflation will remain contained in 2015 given soft commodity prices, and that the RBI will be able to meet its January 2016 target of 6%.”
“After the surprise rate cut on March 4, we think the RBI will ease less than current market expectations. Given uncertainties around commodity and food prices, greater fiscal impulse from the budget, and the need to build credibility around the new inflation targeting framework, the RBI will likely prefer to err on the side of caution, in our view. We think the risk-reward is in favour of the RBI staying on hold through 2015.”
“We continue to expect a trade-weighted appreciation of the INR, due to a shrinking current account deficit and large capital inflows, especially FDI.”