Normalisation is underway but we will need some more time before we can reach economic activity levels, which were recorded before demonetisation, Anubhuti Sahay, India Head for South Asia Economic Research at Standard Chartered Bank said,
Some cheer for the economy as manufacturing activity hits the highest level in five years and commercial vehicle sales, which is a proxy for growth, surged by 60 to 80 percent in December.
In an interview with CNBC-TV18, Anubhuti Sahay, India Head for South Asia Economic Research at Standard Chartered Bank discussed how all this could be factored in the Budget.
There are clear signs of normalisation. If you look at auto sector or core sector data, the buoyancy in these numbers are driven by a very favourable base effect. 2016 was bad after the demonetisation announcement, she said.
Growth indicators have seen a pick up due to a favourable base year on year (YoY), she added.
According to her, normalisation is underway but we will need some more time before we can reach economic activity levels, which were recorded before demonetisation.
On Budget, she said that the nominal gross domestic product (GDP) growth will be lesser at 10 percent than what the Budget has already factored in which was at around 11.5 percent but fiscal deficit shouldn’t have too much of an impact.
Our sense is that the government next year will likely keep the fiscal deficit at closer to 3.5 percent instead of 3 percent which was the fiscal consolidation path, said Sahay.
We are likely to see some more increased spending towards rural area which is needed given the distress in the rural sector but there is too much of concern as we are focusing only on the central government finances, she further mentioned.
From the corporate tax rate perspective, we do expect rate cut to materialise, Sahay added.For full interview, watch accompanying video...