INSUBCONTINENT EXCLUSIVE:
NEW DELHI: When March quarter GDP print delighted investors on Thursday, some economists were busy counting the next headwind: an interest
rate hike.
Some see it coming as early as next week in June money policy review, while some others expect it in August
When it happens, it would increase cost of borrowing for Indian industry, which has been struggling to borrow from banks made conservative
by large bad loans and which is still trying to put the demand-supply matrix in order after a major tax overhaul.
Higher cost of money can
also dent consumer demand, which has just begun to look up following the twin impacts of a cash ban in 2016 and a major tax overhaul
effected since July, 2017.
A spike in crude oil prices has already lifted inflation projections
India, signalling higher risk compared with, say, Indonesia, for whom it was at 51 per cent.
Indonesia, which has a large population and
per cent against the US dollar since April 1, and 7 per cent for the year to date
This ties down RBI to tighten its stance, taking cues from Indonesia and Turkey, said Kotak Institutional Equities
Turkey raised interest rates last week by a massive
300 basis points
consolidated gross fiscal deficit-to-GDP ratio and current account deficit-to-GDP ratio could make it vulnerable to the negative sentiment
of the policy statement will remain hawkish
At 7.7 per cent, the fourth quarter GDP growth was highest in seven quarters.
The data supports view that growth is on an up cycle, at least
in the short term, said Nirmal Bang Institutional Equities
This brokerage pegs FY19 GDP growth estimate at 7.5 per cent
With recovery also supportive of a rate hike, the brokerage expects a 25 bps rate hike in August.
