According to a BofA Securities report, the Covid-19 shock could delay India touching the GDP of Japan by three years. In their latest estimates, it will now happen by 2031 if the economy grows at 9%.
The delay in stimulus announcement is disappointing and raises the probability that a stimulus, if any, might be weaker than expected, says Jefferies India.
Amid slowdown blues India’s import bill is set to come down thanks to low crude oil prices, which will result in a surplus current account in FY21, last seen 17 years ago.
The amount is just 0.8% and 5.8% of India’s GDP and foreign exchange reserves, respectively. And the maturity profile is reasonably spread out in FY21.
Since April 2001 foreign exchange reserves grew 11.15 times to $476.09 billion in mid-February; the RBI may add $21 billion more by March 2021, according to a BofA Securities report.
Ministry of Finance expects to make up the difference through reduced buyback of government securities, additional flows from small savings and the introduction of retail-inflation indexed bonds.
The RBI and its governor, Urjit Patel, are trying to manage a steadily depreciating currency, rising prices, global trade wars, and a flight of capital. But there are obstacles ahead.
India’s energy use will grow at a rapid pace to fuel economic development, urbanisation, and improved energy access . This provides a $750 billion investment opportunity for investors
While hoping for no rate action from RBI, Ind-Ra expects a macroeconomic hotchpotch if these factors sustain beyond a quarter.
