Recovery in Indian economy will begin from the June quarter: Credit Suisse

Posted By: Religare
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Falling inflation and interest rates and improving fiscal and current account deficit condition of India has prompted Credit Suisse to hint at a June onwards recovery in the economy.

In a report, the international brokerage firm said, "We are hopeful that a recovery will finally begin from the June quarter. Over the next few months we should see further fall in wholesale price inflation and interest rates, together with a decline in the twin deficits and mounting evidence of the long-awaited economic recovery."

The report however warned of the persistant structural challenges plaguing the economy.

Robert Prior-Wandesforde, Credit Suisse Director and Chief Economist said "First and foremost, our estimates suggest that achieving a 4.8 per cent budget deficit only requires net budgetary savings of 0.25 per cent of GDP, which is easily achievable via divestments.

"Second, the interest rate environment is becoming less oppressive as short-term money market and commercial paper rates have been falling for more than a year now." He added that RBI has already joined in with interest rate reductions, and benefits of the structural reform measures on business confidence and investment are likely to become increasingly visible.

Prior-Wandesforde noted, however, that the fiscal tightening came at a time when growth was bottoming out, which was evident from the December quarter GDP numbers.

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