Are India's Macros Maintaining a Strong Foundation for Growth? HSBC

New Delhi, June 9 (NationPress) In the midst of ongoing tariff challenges, India’s macros are firmly in place, according to a report by HSBC Mutual Fund released on Monday. The report expresses optimism regarding Indian equities, bolstered by a more favorable medium-term growth forecast.

The ongoing tariff conflicts and global economic outlook have spurred demand for safe-haven assets, resulting in capital outflows and exerting pressure on emerging market (EM) currencies, including India.

The report highlights that India’s connections with the US, its trade diplomacy, and the RBI’s consistent policy approach have positioned India favorably despite global tariff concerns affecting business and growth perspectives.

With India’s inflation cooling, the RBI's Monetary Policy Committee (MPC) is set to focus on promoting growth through preemptive policy easing. The MPC's transition to a neutral stance indicates that future rate cuts may be limited and will depend on economic data.

The report underscores that the RBI will prioritize maintaining system liquidity in surplus to facilitate quicker monetary policy transmission to interest rates.

It suggests that the growth cycle in India might be nearing its lowest point. Factors such as the interest rate and liquidity cycle, falling crude oil prices, and a normal monsoon season are all conducive to a growth resurgence.

While global trade uncertainties pose challenges to private capital expenditure (capex) in the short term, the report anticipates a medium-term upswing in India’s investment cycle, driven by government spending on infrastructure and manufacturing, an increase in private investments, and a recovery in the real estate market.

Additionally, the report forecasts a rise in private investments in renewable energy and related supply chains, as well as the localization of advanced technology components, which will enhance India’s role in global supply chains, promoting faster growth.

Data from the RBI survey indicates that industry capacity utilization is at a commendable level, suggesting potential for increased private capex. The ongoing expansion of the Production Linked Incentive (PLI) scheme is expected to further bolster private investments in targeted sectors.

The HSBC report also anticipates a surge in private capex directed towards renewable energy.

The real estate sector continues to serve as a robust medium-term growth driver, having withstood the pressures of rising interest rates. Demand in major metropolitan areas remains strong, and inventory levels have decreased, according to the report.