Brokerage firm Ambit Capital has a GDP forecast of 7.3 per cent for India in the next fiscal, expecting positive results from a range of policy decisions triggered by election of PM Narendra Modi, appointment of former RBI governor Raghuram Rajan and the advent of technology.
According to the firm, the election of Modi, appointment of Rajan and advent of technology have been “disruptive” in the short run, but the policy decisions triggered by these resets have propelled a silent revolution in ‘access’ to end-markets.
Ambit expects 2017-18 GDP at 7.3 per cent.
Its report expects that the combination of superior physical infrastructure and rollout of GST will boost access to end-markets and inputs. “Cross-country experience suggests that such reforms boost productivity in a gradual manner,” it said.
Further, Modi’s black money crackdown is likely to result in reduction in the cost of debt capital in India. “We expect the cost of debt capital in India (proxied by the SBI lending rate) to fall by around 360 bps by 2019-20,” it said.
“Based on these two macro impacts, we expect GDP to undergo a U-shaped improvement and expect GDP growth in 2017-18 to be recorded at 7.3 per cent year-on-year,” Ambit Capital said.
The first major transformation has been the improved access to end markets, thanks to the advent of e-commerce and the potential implementation of GST.
The second transformation would be access to ‘capital’ in recent years owing to increased competition among banks as well as competition to banks from NBFCs, corporate bonds and other financial technology driven offerings.
Besides, there has been improved access to capital for SMEs through schemes like MUDRA and credit extended by e-commerce majors, and improvement in access to consumer finance through schemes like PMJDY and lenders competing to provide retail credit.
The report further noted that NDA government’s focus on improving physical connectivity (via roads, railways, air and waterways) holds the potential of dramatically improving mobility of labour as well as raw materials.