A stable government at the center is expected to encourage inflows from foreign portfolio investors into Indian markets
After National Democratic Alliance (NDA) secured a second term in the 2019 Lok Sabha elections, Morningstar Investment Adviser India released a report on the macroeconomic outlook for India.
The report titled Morningstar Managed Portfolios – Insights India General Election Results, 2019 stated that a stable government at the Centre is expected to encourage inflows from foreign portfolio investors into Indian markets.
Morningstar India believes a few lead indicators such as weak auto sales, air passenger traffic, muted growth in personal and consumer loans and sluggish rural demand suggest a moderate pace of growth in private consumption expenditure.
The report stated that PMI (Purchasing Managers' Index) data also suggests a slower pace of expansion in the manufacturing and service industry.
The Nikkei India Manufacturing PMI dropped to 51.8 in April 2019 from 52.6 in the prior month and below market expectations of 52.5.
The PMI is a measure of the prevailing direction of economic trends in manufacturing.
Although, private consumption is expected to get a fillip from public spending in rural areas and an increase in disposable income of households due to income tax benefits.
The report also said that the resolution of stressed assets is expected to improve credit flow and a pickup in fixed investment supported by higher construction activity is expected to drive investment activity.
Further acceleration in capacity utilization and credit to the industry sector could improve the growth prospects.
On the other hand, government expenditure is expected to pick up in NDA's second term with a focus on agriculture and rural economy.
"This will also help to counter the imminent risk of any impact from slowing global economy. Government spending could be supported by increased GST revenue, which is expected to rise by 18.2 percent in budget estimates FY20," the report stated.
However, much of it is dependent on improvement in compliance and reduction in disputes.
Going ahead, reform agenda undertook, adherence to fiscal discipline and resolution of stressed assets will broadly drive the growth prospect in the second term of NDA.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.