India offers relative value in ‘slow-growth’ world: BofA-ML

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New Delhi: India is growing faster than most emerging market peers and the country is expected to clock a GDP growth of 7.4 percent this fiscal, a Bank of America Merill Lynch report says.
According to the global brokerage firm, India offers relative value in a slow growth world and this faster growth is allowing the country to emerge as the second largest emerging market after China.

The global brokerage firm marginally cut the growth forecast to 7.4 percent in FY16, from its earlier estimate of 7.5 percent. The country clocked a GDP growth of 7.3 percent for the financial year 2015.

“India still offers relative value in a slow-growth world. In our view we see a shallow recovery at home, we estimate growth at 5.5 percent in FY16 and 6.5 percent in FY17 (old GDP series),” BofA-ML said in a research note today.

According to the old series, the base year for calculation of national accounts was 2004-05.

The Central Statistics Office has now adopted the new series of National Accounts with 2011-12 as base year and subsequently revised the Gross Domestic Product (GDP) growth rate to 6.9 percent in 2013-14 from 4.7 percent and 5.1 percent in 2012-13 from 4.5 percent.

The report noted that India’s slow recovery was largely because of delayed global revival and lending rate cuts. It expects a turnaround in GDP numbers next fiscal assuming better rains and lending rate cuts.

“India is a rare economy in today’s world in that it is not in stagflation. It is poised to overtake Brazil this year after having overtaken Russia last year in nominal GDP terms to emerge as the second largest emerging market after China,” the report added.

The report noted that lending rate cuts hold the key to cyclical recovery and reforms remain important but more from a medium 5-10 year perspective.

On the Reserve Bank’s policy stance, BofA-ML said that the RBI is likely to cut another 25 bps in February after it meets its under-6 percent January 2016 inflation mandate.

Reserve Bank Governor Raghuram Rajan on September 29 effected a more-than-expected interest rate cut of half a percent to boost the economy.

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