6 early signs of Indian economy recovering: Morgan Stanley
Brokerage house Morgan Stanley has said there were early signs of a reversal in the stagflation (high inflation- declining growth) environment with the government‘s steps to correct the bad growth mix of high fiscal deficit and low investment.
April 22, 2013 / 19:38 IST
Moneycontrol Bureau
Brokerage house Morgan Stanley has said there were early signs of a reversal in the stagflation (high inflation- declining growth) environment with the government’s steps to correct the bad growth mix of high fiscal deficit and low investment.“We believe that macro stability indicators-CPI inflation and current account deficit- will continue to show gradual improvement over the next 6-12 months. We expect the government to continue to take policy measures to increase investment spending to slowly improve productivity and growth mix,” the brokerage said in its note Morgan Stanley expects the initial phase of recovery to be driven by an improvement in growth mix and productivity growth rather than a big rise in investment to GDP or headline GDP growth. “The starting point of macro stability environment (inflation, current account deficit and high banking sector loan deposit ratio) will still likely constrain domestic demand from staging a strong recovery. As domestic demand growth remains constrained, we expect external demand to play an important role in supporting growth,’ the note said.Following are the six positive signs, according to Morgan Stanley analysts Chetan Ahya and Upasana Chachra:* Exports growth accelerated to 7% year-on-year in March vs. 4.2% in Feb. * Private projects under implementation picked up a bit in QE March; public sector projects remained steady.* WPI inflation decelerated to a 40-month low of below 6% in Mar. CPI inflation decelerated marginally, to 10.4%, in Mar, but remains high.* 12-month trailing fiscal deficit has shown improving trend since Sep-12.* Banking sector liquidity conditions have improved on seasonal factors in April.* Global oil prices declined significantly. In rupee terms, oil prices are down 12% in 2013. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
