RBI's tight monetary stance to dilute economic growth: S&P
RBI raised interest rates and CRR to check credit growth in rapidly growing sectors such as real estate, as also to contain inflation. Corporate humour | Day in pics
By PTI |
MUMBAI: India's economic growth would slow down to 8.1-8.6 per cent in 2008 in the face of Reserve Bank's strict measures to contain inflation, global rating agency S&P said on Wednesday.
"The RBI’s measures are expected to slow down economic growth marginally in 2008, with real GDP growth projected at about 8.1-8.6 per cent as against 8.5-9 per cent in 2007," S&P said in a report titled 'Asia-Pacific Markets Outlook 2008'.
However, a strong domestic demand is expected to keep the economy on a relatively high growth trajectory, it said.
RBI has raised interest rates and bank's mandatory cash deposits to check credit growth in rapidly growing sectors such as real estate, as also to contain inflation that touched a high of 6.69 per cent in January. The price index has since then declined to around three per cent.
"The moderation to 8.1-8.6 per cent this year reflects a soft landing, taking the Indian economy closer to its current trend growth rate, estimated at 8.5 per cent," S&P Chief Economist Asia Pacific Subir Gokarn said.
While India remains relatively immune to US credit woes, the oil prices, if sustain the current high levels, may impact the ability of Indian economy to grow under its own steam.
On the equity market, S&P gave a neutral outlook and said the market was at a comfortable point with corporate earnings growth to support further upward movement in 2008.
"We are largely neutral on the Indian equity markets as additional foreign inflows may be muted owing to recent government moves to limit foreign fund inflows via offshore derivatives," S&P Head Asia Pacific equity research Lorraine Tan said.
Tan said the market was at a comfortable point and corporate earnings could result in an upside of 10-15 per cent for the Indian equity markets in 2008.
On risks facing the Indian economy, Gokarn said apart from oil prices, it was the pace of infrastructure growth that has not been able to close the gap between demand and supply.
Though politics is likely to continue to weigh on 'sovereign' credit rating of Indian sub-continent, India's outlook is stable.
The overall corporate credit outlook is stable, but the negative bias remains with entities pursuing rapid inorganic growth with leveraged buy-outs and debt-supported expansion.
For the overall Asia Pacific market, S&P said the economic outlook for the region for 2008 is relatively robust, but debt and equity markets could face increasing pressure in the year ahead.
The growth drivers of China and India, where energy consumption has grown rapidly, could be hindered by high oil prices and relatively rich valuations.
China's double digit growth should continue in 2008, the report said, adding that China and the US will continue to be the main drivers for regional equity markets in 2008.
"The RBI’s measures are expected to slow down economic growth marginally in 2008, with real GDP growth projected at about 8.1-8.6 per cent as against 8.5-9 per cent in 2007," S&P said in a report titled 'Asia-Pacific Markets Outlook 2008'.
However, a strong domestic demand is expected to keep the economy on a relatively high growth trajectory, it said.
RBI has raised interest rates and bank's mandatory cash deposits to check credit growth in rapidly growing sectors such as real estate, as also to contain inflation that touched a high of 6.69 per cent in January. The price index has since then declined to around three per cent.
"The moderation to 8.1-8.6 per cent this year reflects a soft landing, taking the Indian economy closer to its current trend growth rate, estimated at 8.5 per cent," S&P Chief Economist Asia Pacific Subir Gokarn said.
While India remains relatively immune to US credit woes, the oil prices, if sustain the current high levels, may impact the ability of Indian economy to grow under its own steam.
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On the equity market, S&P gave a neutral outlook and said the market was at a comfortable point with corporate earnings growth to support further upward movement in 2008.
"We are largely neutral on the Indian equity markets as additional foreign inflows may be muted owing to recent government moves to limit foreign fund inflows via offshore derivatives," S&P Head Asia Pacific equity research Lorraine Tan said.
Tan said the market was at a comfortable point and corporate earnings could result in an upside of 10-15 per cent for the Indian equity markets in 2008.
On risks facing the Indian economy, Gokarn said apart from oil prices, it was the pace of infrastructure growth that has not been able to close the gap between demand and supply.
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Though politics is likely to continue to weigh on 'sovereign' credit rating of Indian sub-continent, India's outlook is stable.
The overall corporate credit outlook is stable, but the negative bias remains with entities pursuing rapid inorganic growth with leveraged buy-outs and debt-supported expansion.
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"Strong domestic and export demand continues in line with expectations and Indian corporates are not likely to face significant challenges in accessing resources," S&P Senior Director Corporate and Infrastructure Rating Anshukant Taneja said. For the overall Asia Pacific market, S&P said the economic outlook for the region for 2008 is relatively robust, but debt and equity markets could face increasing pressure in the year ahead.
The growth drivers of China and India, where energy consumption has grown rapidly, could be hindered by high oil prices and relatively rich valuations.
China's double digit growth should continue in 2008, the report said, adding that China and the US will continue to be the main drivers for regional equity markets in 2008.
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