Home India: Where has all that stimulus gone? – ING
FXStreet News

India: Where has all that stimulus gone? – ING

Analysts at ING offer their after-thoughts on the terrible Indian GDP data released last Friday.

Key Quotes:

“Contrary to the consensus of just a tick-down in growth, GDP in the first quarter of FY2020 (started in April this year) posted a sharp slowdown to 5% year-on-year from 5.8% in the previous quarter. The consensus median was 5.7% growth as against 5.8% in the previous quarter.

We were more optimistic with our 6.0% forecast, which rested on the massive stimulus the authorities, both the government and the central bank, unleashed earlier this year in the election drive to boost growth.    

Data suggests that all the stimulus that has gone into the economy this year — as part of a surge in the election spending as well the RBI taking advantage of low inflation by slashing policy rates – has failed to boost growth.

The latest data also  reflects significant policy lags (pointed out by an RBI policymaker in the latest policy minutes) with less than 40% of the rate cuts so far being transmitted to the banking system.

The 110-basis point RBI policy rate cut this year was by far the most aggressive easing by any central bank  in the world this year.”

FX Street

FX Street

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions.