Comments
India’s exports are expected to grow by 7.2 per cent in 2014 fiscal on the back of improvement in growth of developed markets, says a report by Morgan Stanley Research.
“We expect export growth of 7.2 per cent in fiscal year 2014 versus minus one per cent in fiscal 2013,” it said in a report on Asia Pacific Economics.
Morgan Stanley Research expects a gradual sequential recovery in India’s exports on the back of improvement in developed markets growth from the third quarter of this year, narrowing the trade gap.
The investment bank’s research report expected gold imports to decline due to quantitative controls put in place by the government as well as increase in real rates as inflation expectations moderate.
“We estimate that quantitative control along with increase in real rates will help to reduce gold import demand in this fiscal to around $42 billion in fiscal 2014.”
Non—oil and non—gold imports would remain very weak as tight monetary and fiscal policy would keep domestic demand weak. However, acceleration in exports can lead to some increase due to import content in exports.
The recent steps taken by RBI to augment capital flows by providing a swap window facility to allow banks to swap non—resident deposits and overseas borrowing at a lower cost have mitigated the funding pressure to some extent in the near term.
Indeed, we expect these measures to help increase capital flows by about $15 billion in fiscal 2014 and thus we estimate only a marginal balance of payment deficit in our base case,” said Morgan Stanley Research.
But a prolonged growth slowdown could potentially lead to a continued balance of payments stress, implying that RBI would face the impossible trinity of managing the exchange rate and controlling the interest rates when capital flows would be volatile, the report said.
The report also highlighted that India would be impacted by the rise in the US rates and the US dollar.
“India will be significantly exposed to the trend of a rising US dollar and real rates through the current account imbalance, moderate dependence on foreign debt funding and upward pressure in its real rates,” it said.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.