Stimulus hasn’t helped the Indian economy”¦yet – ING

Prakash Sakpal – Asian Economist at ING – offered his take on the Indian economy and what could be expected from the next Reserve Bank of India (RBI) meeting in December.

Key Quotes:

“India’s increasingly weak activity data has put a solid consensus behind a view that GDP growth slowed further in the July-September quarter after hitting a six-year low of 5% year-on-year in the previous quarter. The consensus median forecast is 4.7%. Bucking the consensus, our 5.3% forecast assumes some, if not all, of the stimulus, has trickled down, while year-on-year growth also gets a lift from the low base effect.”
 
“The Reserve Bank of India (RBI) has been easing its policy since the start of the year and has cut rates by a total of 135 basis point so far – the most among Asian and probably global central banks. Taking into account the policy lag, even if half of this is passed on by banks to their borrowers, it should help the recovery of investment demand. On the fiscal side, 18% YoY growth government revenue and 15% growth in capital spending in the first six months of the fiscal year are hopeful signs.”
 
“Despite our optimistic growth view, we don’t think the RBI will let its guard down just yet, which is highly unlikely in the event growth does tumble in line with consensus. We expect one last 25bp rate cut in December.”