It will take next 3 quarters to get high growth numbers: Jayesh Mehta, BofA ML

Govt is setting a path for global competitiveness and that is good news.

Making tax rates globally competitive is one part done. The second part is interest rates and that also has to be competitive. I am confident, right measures will be undertaken to achieve that, says Jayesh Mehta, Managing Director and Country Treasurer, BofA ML. Excerpts from an interview with ETNOW.

What is your view about the recent announcement on the tax cuts and how do you think bond markets have priced that in?
It is a historic announcement on the tax reforms and that is great news. Of course, this step will attract FDI but that will take some time to come, may be a couple of years or so. But yes, it is setting a path for global competitiveness and that is good news.

The bond market has reacted because of the expected shortfall in to the tax collection. Already, they have announced a Rs 1,45,000 crore shortfall. We were not sure till the RBI dividend came in whether 3.3% fiscal deficit target will be met. Now the additional Rs 1.45 lakh crore is weighing on the bond market.


After all this, an additional borrowing of Rs 70,000-80,000 crore is being projected. The good news is FM did announce last night that at this juncture there is no plan to borrow etc.

These are more supply side measures. How are you carefully looking on the demand side? Do you believe that steps to pull up the economy from the slowdown are also needed?
I am not an equity person or an economist, but what I have been hearing is that there has been some slowdown on auto and general consumer consumption. That is what our research says. It is not that much of a slowdown and with this, we had a doom-and-gloom situation. The sentiment definitely has changed dramatically. We have to consider the festive season sales. There is a divided view in the industry. Some stalwarts are confident that the festive season sales will be much better and will change the mood completely.

One has to see what exactly comes out. If the festive season sales is timid, we will then have to worry about it but at this juncture, that looks like things the sentiment of doom and gloom has completely changed.
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India Inc has welcomed these announcements very positively and feel that India could become an attractive investment destination. What is your view on this?
We had a situation where while we talked about Make in India, the tax rates were so high that it did not make for foreigners want to come in. People who have no other choice will have to continue but the higher tax rates made people shy about expanding. But making tax rates globally competitive is one part done. The second part is interest rates; that also has to be competitive and I am quite confident that they will do the right measures to achieve that.

What is the GDP growth that you are forecasting? Can we expect upward revision on that front?
Upward revision is a little difficult because as of now, it will take next three quarters to get really high growth numbers. But I would still wait for RBI’s assessment on 4th of October before commenting on the growth numbers.

What is your expectation from the upcoming RBI policy? Do you expect another 25 bps cut?
The government has taken a historic decision and that may get supported by a historic situation. Last time, we had a 35 bps cut. Right now people are expecting not more than 25 bps cut and with this additional borrowing and fiscal slippage and stuff like that, people are talking about 15 to 25. I would be surprised to see a 40 or maybe 50 bps rate cut.
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