India has potential to clock 6-7% GDP growth: Goldman Sachs

MUMBAI: India will remain one of the strongest growth stories in the region, says Timothy Moe, chief Asia Pacific regional equity strategist, Goldman Sachs. In a statement released to ET, he said the current cyclical recovery –– coupled with improvements in the ease of doing business that have largely happened ‘beneath the radar’ –– are positive signs for India’s long-term growth and corporate earnings environment.

INDIA’S GDP OUTLOOK As far as long term growth prospective is concerned, the potential for India is one of the highest in the region. India has been trending GDP growth of 6-7% or even more. So, aggregate topline GDP growth is strong and driven by favourable demographics and lower per capita income, which allows more rapid growth as you catch up, starting from a low base. From a cyclical standpoint, the economy is on an upward trajectory, and that’s helped by a more accommodative central bank, with rates and inflation coming down. That is starting to favour corporate earnings cycle which is the key thing for markets.

GOVERNMENT’S REFORM POLICIES The impact of reforms has been like a glass half empty and half full. The half empty part is some headline reforms such as GST not yet being passed. On the constructive side, there has been micro level reforms, such as the ease of doing business. This is facilitating macro growth. This should translate into better corporate earnings. The longer term positive drivers or five-year growth potential is the fact that we have cyclical recovery in the economy which appears to be the beginning of a cyclical upturn in profits.