India’s Outlook Strong, RBI Rate Cut Likely in April
India’s long-term outlook remains strong, and the investment cycle is projected to be on a medium-term uptrend, supported by government investment in infrastructure and manufacturing, pickup in private investments, and a recovery in the real estate cycle. This is according to a new report by HSBC, which has shed light on the country’s growth prospects.
The report highlights that the Indian economy is poised for a strong recovery, driven by a combination of factors. The government’s focus on infrastructure development, including the recent announcement of the National Infrastructure Pipeline, is expected to boost growth. Additionally, the manufacturing sector is expected to benefit from a recovery in global trade and the government’s initiatives to promote ‘Make in India’.
Private investments are also expected to pick up pace, driven by a recovery in corporate profits and a decline in interest rates. The report notes that corporate profits are expected to grow by 15% in the next fiscal year, driven by a sharp decline in interest rates and a recovery in global trade.
The real estate cycle is also expected to recover, driven by a decline in property prices and an increase in demand for affordable housing. The government’s initiatives to promote affordable housing, including the Pradhan Mantri Awas Yojana, are expected to support the recovery in the real estate sector.
Against this backdrop, the Reserve Bank of India (RBI) is likely to cut interest rates again in April. The RBI has been easing monetary policy since February 2019, and another rate cut in April would be in line with the central bank’s accommodative stance.
The report notes that the RBI’s next policy review is scheduled for April 3, and market expectations are skewed towards a rate cut. The RBI has already cut interest rates by 135 basis points since February 2019, and another rate cut would be a testament to the central bank’s confidence in the economy’s growth prospects.
The report also highlights that India’s inflation outlook remains benign, with the WPI (Wholesale Price Index) inflation expected to remain within the RBI’s target range of 2-4% in the next fiscal year. The report notes that the decline in global commodity prices and a recovery in agricultural production are expected to keep inflation in check.
The report also notes that the rupee is likely to appreciate against the US dollar in the next fiscal year, driven by a decline in global risk aversion and a recovery in the global economy. The report notes that the rupee has been trending upwards since January 2020, and is expected to continue its upward momentum in the next fiscal year.
In conclusion, India’s outlook remains strong, driven by government investment in infrastructure and manufacturing, pickup in private investments, and a recovery in the real estate cycle. The RBI is likely to cut interest rates again in April, and the rupee is expected to appreciate against the US dollar in the next fiscal year. The report by HSBC provides a positive outlook for the Indian economy, and is likely to boost investor sentiment in the coming months.
