This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse and the big players behind its meteoric rise. Like what you see? You can subscribe here.
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Wall Street’s big banks were quick to revise their forecasts for India’s economic growth this year.
Bank of America, Goldman Sachs and Deutsche Bank all believe India’s economic expansion may be weaker than previously expected. The country’s annual GDP growth rate slowed to a 15-month low of 6.7% in the second quarter.
However, the Reserve Bank of India seemed to put the negative sentiment aside earlier this month and reiterated its optimism on India’s growth rate, still expecting the economy to grow by 7.2%.
When asked by CNBC reporter Tanvir Gill whether there were downside risks to this forecast, the Reserve Bank of India governor responded with an emphatic “no.” “not at all.”
“We are confident of the 7.2% growth expected in this year’s assessment,” Shaktikanta Das said in a note. Exclusive interview with CNBC.
“The underlying momentum is very strong and is not driven by some seasonal factors or one-off factors. The growth momentum in India is very strong and it is mainly due to structural factors.”
Das pointed to data showing that consumer spending, which accounts for about 60% of GDP, rose to 7.4% in the second quarter, compared with 4% in the previous quarter. Likewise, the construction industry continued to expand at a rate of 10.5% during the same period. The agriculture sector grew 2.2%, hampered by a delayed monsoon but has since recovered.
The governor said “the only part that’s slowing down” is government spending during the election season. “Going forward, I expect the budget amount will be spent by the central and state governments and then they will be able to catch up,” he added.
Das not only insists on India’s near-term growth prospects, but is also optimistic about the medium-term trajectory, predicting that GDP will grow by more than 7.5% annually.
“I would say it’s probably between 7.5% and 8%,” Das added. “But conservatively: seven and a half.”
However, the governor was less sanguine when asked whether India’s growth rates could match what China has achieved over two decades.
Growth rates are of great political significance to Prime Minister Narendra Modi as he sets out his vision to make India a developed economy by 2047 – just 23 years after India has spent a full century as an independent nation. .
Meanwhile, China, now middle- and high-income countriesAccording to a CNBC analysis of World Bank data, growth has exceeded 10% annually for more than 22 years since the 1960s. India has never achieved this feat.
“I don’t think 7.5 to 8 percent growth poses a sustainability issue. I think it’s sustainable. But if you’re looking at 10-plus percent growth, I have to really do more before I take the risk. Homework,” Governor Das said.
The key factor behind the RBI’s recent bullish view is investors and corporates pouring money into India, either to ride on growth momentum or to diversify away from China.
That could change as China takes steps to once again court investment from emerging markets. This week, China’s central bank, President Xi Jinping and other top leaders announced plans to boost the country’s economy and attract investment.
Just hours after the news broke, billionaire hedge fund manager David Tepper of Appaloosa Management told CNBC he had made an unlimited bet on China without any hedges. Bought almost “everything”.
Likewise, strategists at investment bank Barclays have recently become bullish on China.
Strategist Kaanhari Singh said in a note to clients that “new stimulus hopes + a rebound in global laggards + marginal sentiment improvement amid low positioning are setting the stage for China’s second session of the year.” Be prepared for a major breakthrough.
“By October, we are more bullish on Chinese stocks than Indian stocks.”
If India wants to grow as fast as China, it may have to take action.
need to know
India rules out joining the world’s largest trade pact. Indian Commerce and Industry Minister Piyush Goyal told CNBC: “India will not join RCEP because it neither embodies the guiding principles on which ASEAN was founded nor has a free trade agreement with China. in India’s interest. Interviewed this week. Fifteen Asia-Pacific countries, accounting for 30% of global GDP, signed the Regional Comprehensive Economic Partnership (RCEP) in 2020. Watch Goyal’s full interview here.
Indian startup Physics Wallah has a valuation of US$2.8 billion. Venture capital firms, led by Hornbill Capital and with participation from Lightspeed Venture Partners, GSV and WestBridge, invested $210 million in the education technology startup on Friday. This brings its valuation to $2.8 billion, much higher than its last valuation of $1.1 billion. Physics Wallah offers free and paid courses for exams in India, with an average cost of less than $50.
Help become a semiconductor powerhouse. Indian Prime Minister Narendra Modi hopes that the country’s electronics industry will grow from the current $155 billion to $500 billion by 2030, and the semiconductor industry will be a major factor in this. Industry experts are divided on whether that goal is realistic. But they agreed that India needs outside help to get the ball rolling.
New realities facing Indian banks. Arundhati Bhattacharya, former governor of the State Bank of India, told CNBC-TV18 The era of deposit-led banking in India is over. As India grows increasingly affluent, young Indian investors are allocating cash to low-risk assets rather than depositing their money in banks. “Our finance ministry really needs to step up and understand how to balance assets and liabilities,” Bhattacharya said.
Dimon says India is ready to exploit U.S.-China tensions. JPMorgan CEO Jamie Dimon Warning that any “China+1” transformation will take years As companies navigate the complexities of relocation operations. “This is just the beginning, it’s going to take years – you’re talking five, 10, 15 years. So even if it’s going to happen, it’s going to take a long time,” he told CNBC-TV18.
Avoid Mistakes When Investing in India (Subscriber Content). Amit Dixit, head of Asia at Blackstone Private Equity, warned investors that focusing on India’s booming economy and stock market could blind them to potential pitfalls. “You have to have some kind of microcomputer,” Dixit said.
What happened to the market?
Indian stocks are soaring. this nifty 50 It is currently sitting firmly above 26,000 points, setting another record high. The index gained 1.6% this week but is up 20.64% so far this year.
India’s benchmark 10-year government bond yield fell to 6.71% this week from 6.75% last week.
Sajjid Chinoy, chief India economist at JPMorgan, told CNBC on CNBC TV Week that India’s “current account deficit has been very normal and very benign.” The bank expects India’s deficit to be around 1.2% of GDP this year, which is very sustainable. In addition, India’s foreign exchange reserves give it a certain degree of monetary policy independence.
Raamdeo Agrawal, Chairman and Co-Founder, Motilal Oswal Financial Services, commented on the investment landscape in the country. He said India’s bull market was “in full swing” but would be “much bigger” and predicted the Nifty 50 index would reach 50,000 points by 2030.
What happens next week?
Mamba Financial, a non-bank financial company that issues loans, will go public on Monday. Heating and cooling parts maker KRN Heat Exchanger and Refrigeration made its debut on the Indian stock market on Thursday.
September 27: U.S. personal consumption expenditures index reading
September 30: Mamba Financial IPO
October 3: KRN Heat Exchangers and Refrigeration Company IPO
October 4: US non-farm employment data for September, India comprehensive PMI
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