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Indian economy in period of dense fog: Credit Suisse

Thursday, September 14, 2017

Describing Indian economy to be in a period of "dense fog", Credit Suisse today said structural reforms including GST has introduced significant uncertainties related to growth, fiscal health, inflation, currency and the banking system in the country, for the near term.

Credit Suisse' India Equity Strategist Neelkanth Mishra told reporters here that the "Indian economy is going through a period of dense fog" with uncertainty of macro-economic variables by itself is likely to impede investment intentions and act as a drag on growth, causing downgrades to GDP as well as earnings estimates for the next financial year".

Terming the Indian economy as "a house under renovation", Mishra said, "a number of structural changes like the exodus of millions of workers away from agriculture, the introduction of GST, the Real Estate (Regulation and Development) Act and the Bankruptcy Code are breaking down vicious cycles that the economy was trapped in".

"However, they also introduce significant uncertainty on several macro-economic variables in the near term: growth, fiscal health, inflation, currency and the banking system," Mishra added.

According to findings by the financial service major, government spending growth is slowing down sharply, while half of the population is seeing weak income growth.

Further, he also said that various indicators like oil demand is still weak although it is showing a pick up. "Oil demand growth which turned negative in Feb 2017, is picking up now but is still weak, also cement demand weakened sharply post demonetisation has turned positive in May this year, but still needs to show signs of recovery," Mishra said adding that there is uncertainty if such weak indicators "are temporary".

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