warning
March 2022 – Please be aware of scammers falsely representing AMP Capital. AMP Capital is aware of an ongoing scam operation targeting customers and the broader community, offering inflated interest returns, available through fictitious investment vehicles, titled AMP Capital High Yield Fixed Return Global Market Fund. Through the use of phishing emails and phone calls, malicious operators are attempting to entice them to invest in a false product that features AMP Capital’s branding. Please be aware this is a not a legitimate product from AMP Capital.

AMP Capital does not approach potential customers via electronic direct mail (EDM) nor does the company solicit personal or financial information via email. If you are concerned that you may have been targeted by scammers, please contact us on 1800 658 404 from 8.30am to 5.30pm Monday to Friday (Sydney time). More information on scams can also be found on the ACCC’s website Scamwatch.

Economics & Markets

Reform, not rate cuts, key to reviving Indian economy

By Diana Mousina
Economist - Investment Strategy & Dynamic Markets Sydney, Australia

The Indian economy is currently suffering its sharpest slowdown in economic growth since 2009, with GDP growth currently running at about 4.5% year-on-year; down from 7-8% less than two years ago.

Both the Indian government and the Reserve Bank of India have taken measures to stimulate the economy. The government has made tax cuts, while the Reserve Bank has progressively cut interest rates to a near decade low of 5.15%. The central bank also recently announced an ease on lending for cars, residential housing and small businesses, and a $14 billion facility for commercial lenders to borrow more cheaply. Unfortunately, these measures have so far failed to achieve the desired boost to spending and there are no guarantees that the situation will improve over the short term.

At the same time, the government’s budget deficit is increasing, driven by extremely high growth in off-budget measures, which has crowded out growth in the private sector.

Credit expansion in the country is exceptionally weak and business investment is low, fuelled by uncertainty around the continuing slowdown. Re-capitalisation of the country’s struggling banks is likely to be needed to increase credit growth.

The cyclical slowdown across the rest of the world’s emerging economies and the weakness in China have also contributed to India’s economic performance, with new spectre of the coronavirus epidemic and its impact on Chinese manufacturing and trading adding further uncertainty to the mix.

To better stimulate spending and credit growth, it's likely that the Reserve Bank of India will implement additional interest rate cuts, following recent global trends; however, it will be constrained by India’s high inflation levels, currently running above 7% year-on-year. A more effective policy could be to try to stimulate certain private sectors of the economy and increase business investment growth.

Rather than relying on monetary policy, the Indian government will need to act decisively to turn the country’s economy around, and investors should be wary until we see more positive action to achieve that.

Subscribe below to SMSF News to receive my latest articles

Diana Mousina, Senior Economist
Share this article

Subscribe to our Insights

Here's what we found for you

Here's what we found for you

Here's what we found for you

Here's what we found for you

Our Privacy Policy explains how we handle personal information and use cookies and website tracking. We will follow the cookie and tracking settings you have selected in your browser.

Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.

 

This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

Cookies & Tracking on our website.  We use basic cookies to help remember selections you make on the website and to make the site work. We also use non-essential cookies, website tracking as well as analytics - so we can amongst other things, show which of our products and services may be relevant for you, and tailor marketing (if you have agreed to this). More details about our use of cookies and website analytics can be found here
You can turn off cookie collection and/or website tracking by updating your cookies & tracking preferences in your browser settings.