“The nature of the slowdown is broad-based, with consumption as well as investment oriented sectors feeling the pain,” said Indranil Pan, chief economist at IDFC First Bank Ltd. in Mumbai. “Continuing poor domestic sentiment along with the lack of any demand uptake globally would ensure that any recovery process would only be gradual.”
The Reserve Bank of India has already cut interest rates by 135 basis points this year to the lowest since 2009, with more easing to come. The central bank is expected to look through the recent breach of its 4% medium-term inflation target and deliver another rate cut on Dec. 5. India’s Central Banker Das Faces a Tough Balancing Act (1) “The onus is on the government to do the heavy lifting,” said Devendra Pant, chief economist of India Ratings and Research, a local unit of Fitch Ratings Ltd.. He expects the government will miss this year’s fiscal deficit target of 3.3% of GDP
as it boosts spending while tax revenue falters. The weak growth outlook and interest-rate cuts are weighing on the rupee, the worst performing currency in emerging Asia this quarter.
Finance Minister Nirmala Sitharaman
said this week she’s not closing the door on additional steps to support the economy. She posted several times about the economy on Twitter on Thursday, saying macroeconomic fundamentals are strong. There is growing clamor for more tax cuts, this time for individuals and on equities. Indian stocks touched a record high this week as investors pumped in money on speculation of more stimulus measures.
“It’s a deep cyclical slowdown that the economy has gone into,” Chetan Ahya, chief economist at Morgan Stanley, said in an interview with Bloomberg Television. The economy has been hit by several shocks in recent years -- from the taper tantrum in 2013 to demonetization in 2016 and this year’s trade war -- making a strong rebound difficult, he said. “As the global recovery comes through, India’s economy will be on the map finally,” he said.