Indian economy, inflation may surprise on the upside: Credit Suisse
Prior-Wandesforde sounded less optimistic on China saying those expecting a strong, sustained recovery of the Chinese economy are likely to be disappointed as new regulations on shadow banking, the trust sector and local government funding will constrain public sector investment.
Even the private sector is likely to continue to struggle.
However, the report adds that "it is not expecting a "v-shaped" recovery to materialise, but our fiscal year average forecasts of 5.7 per cent in FY'13, 6.9 per cent in FY'14 and 7.5 per cent in FY'15 are all above consensus."
On inflation front, he said their modelling suggests the stickiness of wholesale price inflation through much of 2012 can be largely explained by the persistence of relatively high fuel and food prices. This the brokerage feels will have important "second-round" effects on the core rate, as well as robust monetary growth.
"The good news on inflation is that most of these drivers are now waning, while the lagged effects of sub-trend growth and weaker rupee denominated commodity price inflation are continuing to feed through," he said.
"Looking ahead, our analysis suggests the core rate will drop below 4 per cent by mid-2013, with the headline rate slipping to less than 6 per cent. This in turn helps to explain our sub-consensus headline wholesale price inflation forecasts of 7.3 per cent and 6 per cent in FY13 and FY14 respectively," Prior-Wandesforde said.
On policy easing by the apex bank, Prior-Wandesforde
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