Econ­o­mists cut es­ti­mates on shock In­dia’s growth slow­down

New Straits Times - - Business / World -

MUM­BAI: The shock slow­down in In­dia’s growth has econ­o­mists rush­ing to cut their es­ti­mates for the end of the year. Their pes­simism isn’t shared by cur­rency strate­gists who are rais­ing fore­casts for the ru­pee.

Cit­i­group Inc and UBS Group AG are among global banks that have low­ered their es­ti­mates for In­dia’s growth af­ter the lat­est data showed gross do­mes­tic prod­uct (GDP) in the June quar­ter rose at the slow­est pace since 2014. Even so, the me­dian ru­pee fore­cast for end-March is ris­ing this month for a sixth straight month.

“In­vestors are more in­clined to view this GDP miss as a blip, rather than a de­te­ri­o­rat­ing sig­nal over the macro back­drop in In­dia,” said ING Groep NV for­eignex­change strate­gist Vi­raj Pa­tel.

The ru­pee “cer­tainly stacks up as one of the best among Asian for­eign ex­changes, given the com­bi­na­tion of a ro­bust macro out­look, low ex­ter­nal fi­nanc­ing risks and low po­lit­i­cal risks”.

The jury is still out on how long the slow­down in In­dia’s growth will last given it’s been at least partly trig­gered by one-time events such as the govern­ment’s un­prece­dented cur­rency ban in Novem­ber and the dis­rup­tion caused by the July 1 im­ple­men­ta­tion of a na­tion­wide sales tax.

Cur­rency in­vestors need to weigh the do­mes­tic soft­en­ing against broad weak­ness seen in the US dol­lar this year, which has sup­ported the ru­pee.

The In­dian cur­rency has climbed 6.1 per cent this year, with the bulk of its gains com­ing in the first half of the cal­en­dar year. It has weak­ened about 0.2 per cent so far this month to 64 per US dol­lar yes­ter­day, af­ter ris­ing 1.1 per cent in the last two months.

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