Indian economy may grow at 6 per cent in 2020, says report

Fears of an economic crisis in India are likely to decrease and the country may recover from decelerating growth in 2020, a new report said on Tuesday.

According to US-based private equity firm Blackstone, this year the Modi government is likely to continue business-friendly growth reforms, and the Indian economy is likely to grow at 6 per cent, while the markets could rise by up to 20 per cent.

Blackstone Vice Chairman Byron Wien has teamed up with Chief Investment Strategist Joe Zidle this year to deliver their list of ‘Ten Surprises for 2020’, This is the 35th year that Wien has given his views on economic, financial market and political surprises for the coming year.

Wien defines a “surprise” as an event that the average investor would only assign a one out of three chance of taking place, but which Wien believes is “probable”, or having a better than 50 per cent likelihood of happening.

Wien predicts that US President Donald Trump might not be convicted or removed from office in 2020.

Both China and the US may keep their hands off Hong Kong in 2020 and will wait for the protests in the latter to settle down by itself, Wien predicted.

Emboldened by the pain of economic sanctions, Iran is likely to take advantage of the US’ unwillingness to intervene and step up acts of hostility against Israel and Saudi Arabia.

According to the report, economic problems in Russia may intensify even though the price of oil is rising this year. As a result, social unrest likely to spread in that country.

In 2020, anarchy and disharmony likely to spread throughout the world, creating turbulence in financial markets everywhere. Investors may turn away from emerging market local currency debt, forcing spreads higher, Wien predicted.

North Korea may agree to suspend its nuclear development programme after another meeting with President Trump in 2020, the report said.

Meanwhile the analyst firm Brickwork Ratings said on Tuesday that the declining investment, stagnant exports and rising unemployment on the eve of the Union budget presentation pose formidable challenges to the Finance Minister in its formulation, Brickwork Ratings.

According to the rating agency, the reforms so far have yielded little, and despite a reduction of 135 basis points by the Reserve Bank of India (RBI) in its policy rate, its transmission has been sluggish and the impact is marginal.

“The crucial question is whether she can afford to deviate from the fiscal restructuring path laid down by the FRBM (Fiscal Responsibility and Budget Management) Act to provide the stimulus to prop up the declining consumption and investment climate as also the ambitious announcement made regarding infra spending,” it said.

Given the subdued global and domestic environment, lingering twin balance sheet crisis and the relative ineffectiveness of monetary policy in the short term, most observers consider that the time is opportune for providing substantial fiscal stimulus for reviving the growth environment.

“However, the IMF (International Monetary Fund) Article IV Consultation document released in December continues to argue for continued fiscal consolidation” Brickworks said.

“It expects the growth to rebound due to the lagged effects of accommodative monetary policy, actions to facilitate its transmission, ensuring liquidity, greater clarity on corporate and environmental regulatory uncertainty and additional support by the government to augment rural consumption through programmes like PM-Kisan,” it added.

Brickwork Ratings said the economy is on the mend and further measures are needed to reverse the economic slowdown.

While slowdown is a global phenomenon, India has remained insulated from such events in the past due to its burgeoning consumer demand on the back of its demographic dividend, it said. The Indian economy was expected to grow at a much faster pace encouraging the nation to set a goal of a $5 trillion economy in the next five years thereby targeting a CAGR of 15 per cent.

However, the Indian economy is suddenly witnessing a sharp deceleration marked by low demand and production. The government has undertaken a series of steps in the recent past to reverse the economic downturn. The document analyses the trends in key parameters of the economy, the initiatives hitherto taken and gives the agency’s opinion on what more is required.

The major issues faced by banks were stress assets in the books, liquidity and cost of funds was a terrible pain to NBFCs and MSMEs.

Indo-Asian News Service