SBI's internal prognosis suggests that an economic recovery is round the corner in India. Here are top points:
* Our CPI glide path shows that retail CPI will be below 5.5% in November. The expected trajectory in CPI will be benign and breach 7% in August, 6.5% in September and 6% in October.
* Inflation in November may be pulled down by 20% purely because of the base impact. However the good thing is that one should not dig too much into declining trend attributable to base impact. Our trend analysis suggests that on an average only 8%-9% is attributable to base impact, and the rest to incremental momentum. Even though retail CPI numbers will accelerate after November, the average CPI for FY15 will be no more than 7.5%. Thus, there is no denying of the fact that the incremental impact has slowed down significantly in the last couple of months.
* Meanwhile, IIP growth in June is likely to cross 5%, with visible recovery in passenger car sales, and significant slowing down of the de-growth in commercial vehicles segment.
* There is also an improved sentiment on the consumer spending.
* With monsoon rains fast recovering, our first quarter GDP growth estimates is now trending at close to the median estimate for FY15 at 5.5%.
* On the external sector, India’s export growth has an asymmetric relationship with global exports (when global exports pick-up, Indian exports clearly outstrip on the upside, but when global exports decline, Indian exports also outstrips on the downside), and this well help our exports grow faster in the emerging environment. Read Full Report
By Dr. Soumya Kanti Ghosh, Chief Economic Adviser, Economic Research Department, State Bank of India