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Capex key driver of growth push; RBI rate cut in Feb: MS

Chetan Ahya, chief Asia economist, managing director, Morgan Stanley says recovery in capex is still weak as of now, but is bottoming out, while adding that capex will be the key driver of growth recovery for India.

Year 2015 will see CAD and inflation under control, rising GDP, but not a complete goldilocks situation, says Chetan Ahya, chief Asia economist, managing director, Morgan Stanley. He sees a gradual acceleration in GDP and it may inch towards 6 percent toward the end of 2015.

He says recovery in capex is still weak as of now, but it is bottoming out, while adding that capex will be the key driver of growth recovery for India. According to him, there is some improvement in capital goods imports.

On the difference in opinion between the Reserve Bank and the finance ministry, he believes Raghuram Rajan and Arun Jaitley’s objectives are not different. He says the finance minister has already clarified that he will leave it to Rajan to decide when to reduce interest rates.

Ahya sees RBI reducing rates in February, latest by March. He sees a 25 basis points (bps) rate cut in February or March and has a base case scenario of 50 bps rate cut in 2015. In a bull case scenario, RBI may lower rates by 100 bps in 2015, he adds.

Stay tuned for more…

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