Sonal Varma of Nomura sees business cycle recovery starting to come back. She says relative to manufacturing, it is the services side of the economy that is doing much better.
Varma expects the government to project a fiscal deficit of 3.6 percent of GDP for FY16, and is hopeful of the it staying the course on fiscal consolidation.
In its sixth bi-monthly Monetary Policy review, the Reserve Bank of India kept policy rates unchanged after going ahead with a 25-bps cut just three weeks ago, suggesting government‘s annual budget at the end of this month may hold the key to future action.
For the fiscal as a whole, the consensus CAD was 1.8 percent of GDP.
According to Sonal Varma, central bank needs some more time to observe inflation and growth trajectory and therefore, it is unlikely that anything concrete will happen before April policy
A gradual recovery is underway for the Indian economy and the country is expected to clock a GDP growth of 5.5 percent in the current fiscal and 6.6 percent in FY16, says a Nomura report.
In an interview to CNBC-TV18, Sonal Varma, India Economist at Nomura Financial Advisory said she sees inflation heading to undershoot RBI target.
Experts CNBC-TV18 spoke to believe that the trough of economic growth, logged in at below 5 percent over the past two years, has likely been seen. They discussed the various factors that could impact economic growth in the medium term ahead.
Commerce secretary Rajeev Kher says he is unaware of any decision on gold import curbs and that the revenue department officials will know better.
The 6 percent inflation target set by the RBI for the rate cut is intermediary and as market enters 2015, the entire framework of the monetary policy will change.
Consumer prices rose a slower-than-expected 5.5 percent on year in October, following a 6.5 percent increase in the previous month, led by a fall in local food prices. This was the slowest pace since the index was launched in January 2012.
Sonal Varma of Nomura Financial Advisory & Securities believes the Reserve Bank is taking a medium-term view on inflation and wants to see it at 4-4.5 percent. Her base case is still for a rate cut in January 2016.
Sonal Varma, economist at Nomura India, thinks everyone is overplaying the role of commodity price fall on CPI considering it is largely a non-tradable basket because it has food and services in it. Hence the impact is rather low.
Sonal Varma believes indicators like cement, auto demand are showing positive signs of growth.
The Reserve Bank governor Raghuram Rajan took charge on September 4 and soon managed to reign in the rupee's fall. Since taking charge, his two-point agenda has been inflation targeting and bank recapitalisation.
Sonal Varma, India economist at Nomura Financial Advisory & Securities says Monday‘s Supreme Court verdict aside, growth numbers have surprised on the positive. She believes that broadly cyclical recovery started before elections.
Looking ahead, optimistic projections on revenue are the key to continued consolidation in FY15. The question is whether the 4.1% fiscal deficit number is credible.
Jayesh Mehta, Managing Director & Country Treasurer, Bank of America is of the view that this interim Budget would be a short-term event because the there is a larger event around April.
India`s economy began a feeble recovery in the July-September period, expanding 4.8 percent - a touch faster than the 4.7 percent growth in the previous three months. The gross domestic product (GDP) data for December quarter is due on February 28.
While Sonal Varma of Nomura says the worst of the economic slump is behind us, she doesn‘t see any immediate triggers for the domestic demand cycle to pickup.
Going forward, we expect GDP growth to pick up further to around 5 percent in Q4 2013 on a continued push from the bumper summer crop and strong exports.
Sonal Varma, Executive Director & India economist, Nomura explains liquidity adjustment facility.
Reverse repo is the rate at which when banks have excess funds they can park that money with the Reserve Bank of India and the interest rates that the Reserve Bank of India pays to the banks for parking their excess money is the reverse repo rate, says Sonal Varma, Executive Director & India economist, Nomura.
Sonal Varma, Executive Director & India economist, Nomura explains that the interest rate at which I borrow from a bank will be a function of the base rate that a bank charges but the base rate in turn is determined by various factors including what is the interest rate stance of the central bank.
According to Sonal Varma, Executive Director & India economist, Nomura, the Reserve Bank of India is also the regulator of the banking system. It is also responsible for setting the interest rates in India.