Quotes from Barclays Capital:
-Indian policymakers remain in a tough spot - constrained by high
inflation (despite the somewhat softer print last month), but with a
clear need to support growth given weak industrial activity and
faltering domestic confidence.
-With growth settling around 5.5% y/y in recent quarters and no sign
of any quick turnaround, the pressure on policymakers is increasing.
This latest IP reading further underscores the extent of the slowdown
in growth momentum.
-We think the Reserve Bank of India's (RBI) growth projection of 6.5%
for FY 12-13 now looks increasingly optimistic (Barclays: 5.8%). Given
this situation, we think the policy focus needs to become a lot more
balanced between inflation and growth.
-Markedly sub-par growth, softening in core inflation, near-zero
fiscal spending headroom and likely only hesitant government policy
initiatives to revive the economy will eventually lead to sizeable
monetary accommodation in coming months, in our view. We maintain our
expectation of a further 100bp of repo rate cuts in FY 12-13.
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