Slowdown underway not just globally but also in India, says Nomura India

Sonal Varma, managing director and chief India Economist at Nomura India and Sajjid Chinoy, chief India Economist at JPMorgan shared their views and readings on some of the big numbers announced over the last few days.

Varma said that a slowdown was clearly visible not just globally but also in India. “The growth side indicators are now clearly pointing to a slowdown that is underway and not just in India but globally ... most indicators like export growth rate in a lot of countries has been negative in December. So the growth slowdown numbers seem to be there but despite cost side pressures coming off, the question is why core inflation is so sticky because typically that’s a sign of demand still being very strong,” she said.

“Our broader assessment is still that core inflation will come off and the current persistently high core inflation we are seeing is a result of specific idiosyncratic factors and some lagged effect of past high prices pass-through still going on but that’s not going to be a sustainable scenario,” she added.

Varma doesn't expect a rate hike by the Reserve Bank of India in the next monetary policy but expects the central bank to change its stance to neutral. “We do think there is still a decent probability of the RBI changing its stance back to neutral and our base case view is that there will be a rate cut but only in the third quarter of 2019 and not immediately,” she said.

Contradictory to Varma's view, Chinoy expects the RBI to hike the rate in February "if government sticks to fiscal deficit".

Talking about growth, Chinoy said, “I do not think growth is as weak as we think it is and that’s a view we have had for several weeks.”

“If you look closely at the high frequency data in India, the PMI surveys have held up at quite a high level, bank credit growth has picked up very smartly and offset at least some if not all of the NBFC slowdown,” he added.