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India: Mixed economic outlook – Standard Chartered

In view of analysts at Standard Chartered, India’s economic outlook remains mixed for the rest of FY19 (ending March 2019) and for FY20 mainly due to increased volatility in crude oil prices, the mid-2019 national elections, unexpectedly subdued food inflation, and concerns about growth moderation.

Key Quotes

“We maintain our GDP growth forecast at above 7% for both years. The government is likely to stay on the fiscal consolidation path as it adheres to the budgeted fiscal deficit target for FY19. Meanwhile, we lower our CPI inflation projection on the recent sharp oil price decline and consistently lower food inflation. Room for a 25bps rate cut has opened in Q1-FY20, in our view.”

“We now forecast one rate cut in Q1-FY20 versus two hikes in H1-FY20 previously as we lower our FY20 CPI inflation projection to 4.4% from 4.9%.”

“Given increased uncertainty, we remain watchful of the following risks, which could impact our growth outlook: (1) ICB and food prices, (2) election-related expenditure, (3) the domestic election outcome, and (4) domestic and global growth.”

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