India witnessed a resilient consumption growth over the last few years even as macros were muted, and in order to sustain this momentum a pickup in employment is needed, says a report by UBS. According to the global financial services major, consumption growth in India over the past three to four years has been perceived by investors as resilient, despite a muted macro environment and weaker household disposable income trends. “Our discussions with macro experts and government officials indicated that job creation remains a key focus area, especially going into the 2019 general elections,” UBS said in a research note. It further noted that muted household disposable income trends reflect possibly weaker employment trends in India, though there is no recent credible data on job creation. “A material expansionary policy (fiscal/monetary), like the one seen early this decade, or strong global growth seen last decade is absent and unlikely anytime soon,” UBS said adding a pickup in employment is thus needed to sustain/ accelerate consumption growth.
The global brokerage further said, “the Indian market is trading near historical highs, at 17 times 12-month forward PE, off consensus earnings estimates that are likely to see further cuts”.