Singapore has reported 50 coronavirus cases, one of the highest tallies outside China, and there is mounting evidence of local transmission.
“Any reduction in the fiscal deficit could result in a negative credit impulse in the near-term, but will need to be balanced with a credible consolidation plan further-out,” according to the the bank's research report “India Budget Preview: Loosening the purse” released on Thursday
According to Singapore's DBS Banking Group, notwithstanding a challenging trade outlook, conducive global drivers, such as flush of liquidity owing to low interest rates and stable oil prices, provided a favourable external environment for the Indian economy in 2019.
The central bank has decided to conduct simultaneous purchase and sale of government securities under Open Market Operations (OMO) for Rs 10,000 crore each on December 23, 2019.
The financial services major said that this year's narrative on the Indian economy was dominated by a sharp deceleration in economic activity and persistent financial sector stress.
"Real GDP is likely to print 4.3 percent YoY in 3Q vs 2Q's 5 percent, nearing the trough for this cycle," DBS said in its daily economic report.
Encouragingly, cyclical growth momentum is getting a hand from reduction in rates and surplus liquidity conditions, wrote Radhika Rao, Vice Senior President and Economist at DBS in Singapore.
The government had last month announced a ten percentage point cut in corporate taxes, to get Indian levies at par with others, to spur investments.
Real GDP slowed to 5 percent year-on-year in 2Q (first quarter of FY20) from the first quarter's 5.8 percent, below DBS' sub-consensus and market expectations.
According to DBS, RBI Governor's recent comments that policy stance will depend on incoming data nudged traders to pare easing expectations.
Instead the report argued that increasing the ceiling on foreign portfolio investors in government securities is a better option considering the huge risks in raising debt in a foreign currency.
DBS, the first Singapore bank to kick off the sector's results, posted an 8.5 percent rise in first-quarter net profit from a year earlier, and said the macro-economic environment had stabilised.
Srikanth Mopidevi, Executive Director and Head, Consumer Banking - Big Data Analytics Technology, DAH2, takes us through the bank’s technology transformation journey.
DBS, which was the first bank in India to launch digital-only operations as Digibank in 2016, has already received approval from the Reserve Bank of India for the wholly-owned subsidiary.
The bank aspires to hire top 100 talents in disruptive technologies via hackathon.
Presenting the interim budget for FY 2019-20 ahead of the general elections due in April-May this year, Finance Minister Piyush Goyal on February 1 proposed an array of incentives for both middle-class and farmers.
"Lower than budgeted indirect tax revenues and weak divestment proceeds are a source of worry," wrote Radhika Rao, economist at DBS Group Research, in the commentary.
“A string of weak inflation prints at home and perception that the incoming RBI Governor might soften the policy stance pushed the curve lower,” wrote DBS Group Research Economist Radhika Rao and FX Strategist Philip Wee.
INR bonds have retained recent gains but struggled to make further headway.
"We doubt that India can sustain a growth trajectory above 8 percent for the rest of this fiscal," DBS said in a research note, adding that "We expect FY19 growth to moderate to 7.4 percent this year".
The economy has recovered since the transitory shocks of demonetisation and GST rollout.
The bank sees a 25 bp hike accompanied by a neutral stance triggering a small uptick in the 10-year yields followed by consolidation in a 7.65-7.80 per cent range.
The foreign lender will start operating as DBS Bank India, once it receives a final nod from RBI to transform all its 12 branches into a newly registered wholly-owned subsidiary.
According to Singapore's banking group DBS, while India's foreign reserves are at a record high, just as growth gathers momentum, optimism has been dented by widening current account deficit, pushing back of fiscal consolidation goals and inflation expected to remain above target next year.