India: Weakness in growth momentum - ANZ
|According to analysts at ANZ, the Indian economy continues to show weakness in growth momentum as the general activity and consumption indicators show no let-up.
Key Quotes
“Investment indicators provide some green shoots (like credit to industry and investment proposals), a sustained recovery is however, missing. Likewise, our GDP tracker shows a run-rate of below 6% mark.”
“In line with the weakness in Q4 FY19 (quarter ending March 2019) GDP print, we now expect FY20 GDP growth to be even slower at 6.5% y/y. Although we still think that a gradual recovery will eventually take hold, we have pushed it out to H2 FY20. The growth slowdown, amid weakness in demand pull inflationary pressures will see the Reserve Bank of India (RBI) cut rates further this year. We expect a further 75bps of cuts in the next six months.”
“We are more aggressive on our monetary policy call given the limited fiscal space to prop up growth. While markets await the full year budget of the new government on 5 July, it is crucial that fiscal consolidation will not be pushed out further.”
“We believe easier liquidity conditions and resolution of stress in the financial system will lead to a recovery in FY21.”
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