Credit Suisse issued a report stating that the country's economy is showing signs of bottoming out. After several years of downgrades to the country's medium-term growth outlook, the estimates are likely to be upgraded now.
According to the report, the consensus forecasts of GDP growth for FY 2022 over FY 2020 stopped falling after October 2020 (currently at -1 %). Analysts expect these estimates to be revised upwards.
"The easing of monetary conditions reverses the tightness of 2015-18, with the large balance of payments (BoP) surpluses that have allowed for this also providing the macroeconomic scope for a stimulus," Credit Suisse co-head of equity strategy, Asia Pacific and India equity strategist Neelkanth Mishra told reporters on Thursday.
The multi-year real estate cycle is no longer a drag on the economy, he said, adding that there is a pro-growth shift in the country's industrial policy.
Mishra said the production-linked incentive (PLI) schemes can add 1.7 percent to GDP by FY27, or an average of 0.3-0.5 percent a year.
The cuts in corporate tax rates in September 2019 and the labour law reforms should contribute as well.
The report said a pro-cyclical fiscal policy was a drag on growth in the September 2020 quarter and is now likely to support it as the earlier-than-expected rebound in economic momentum boosts (central and state) government tax receipts.
