(08 FEBRUARY 2018)DAILY MARKET BRIEF 2:Indian economy confirms its recovery
Providing strong growth numbers following 2017 Annual GDP growth of 7.10%, 2017 December CPI and WPI Y/Y of 5.21% and 3.58% respectively, we see further potential for recovery in India. Following major growth impediments essentially caused by: declining exports (between November and December 2018: -18.20%), cancellation of 86% of money in circulation (impact affecting 2017 economic year), the July 2017-released Goods and Services Tax roll-out misunderstanding and the oil price hike in the middle of 2017. In order to counter these drawbacks on Indian growth, the Indian Government took the decision to make use of fiscal stimulus, reducing corporate taxes by 25% for companies with turnover of up to INR 2.50 billion (USD 39 million), applicable for more than 99% of Indian companies that issue surplus, which in turn will be stimulating job creation (unemployment rate stagnates at 8.80%, in line with 2002 numbers).
In this economic context, the Reserve Bank of India confirmed yesterday its willingness to maintain its Repo rate at 6%, unchanged since February 8th 2017, limiting further debt increase (Indian debt in % of GDP published at 50.10%) and trying to contain inflation in its 2%-6% band range.
Since recent RBI communications, Indian 10 years Government Bonds yields declined by -0.52% while the S&P BSE Sensex rose by 1.58%, pushing investor expectations higher for 2018. USD/INR is trading at 64.25 (-5.82% since January 2017), signaling positive economic signals for the Indian economy.
By Vincent Mivelaz
