The Hindu Business Line : Growth story will sustain

Even without the extraordinary circumstances of 2008 and inflation sources that are now negative for India Inc, high growth-high inflation environment inevitably leads to margin pressures. That is why reasoned voices welcomed the RBI’s measures to rein in inflation from mid 2006. This aspect of seeking high growth at the risk of higher inflation is where the RBI policy stance has placed the economy and India Inc in a better position to combat the present phase of 8 per cent plus inflation. As a result, the magnitude of measures required now to temper inflation to the comfort zone of the RBI is smaller, and so, the impact on growth could be more moderate. As an environmental factor, the present situation does not represent a significant negative. The growth story in India over the past three years has been in environment of rates similar to or higher-than-present levels. We may still sacrifice some more growth — GDP was expected to lower in FY 2008 and a tad more so in FY 2009 — and there downside in the latter period may be 10-20 basis points more, if the current phase continues and/or is accompanied by further hikes. The message is the growth story will sustain at close to 8 per cent levels for next year and that cannot be bad from an economy and market perspective after five years of growth at about 8.5 per cent.

The Wise Investor, Sundaram BNP Paribas Mutual

Capacity constraints will ease

The marked absence of a repo rate hike is positive for general economic activity. India’s breakneck economic growth has put strains on its capacities resulting in inflationary environment in the country. This, coupled with sky-high prices of global commodities, has exacerbated the impact on inflation. As corporate capex cycle progresses and infrastructure spending rises, not only will they generate employment, the capacity constraints would ease and inflation would subside. Higher job creation and falling inflation would create a perfect situation for re-acceleration of economic growth.

Birla Sunlife Mutual

Growth remains on track

While it seems that the US sub-prime crisis is settling down, uncertainty remains and global events will continue to shape local sentiment and overall liquidity. However, to some extent attention may shift towards domestic growth and inflation dynamics.

On the one hand, growth at this juncture remains on track. On the other hand, while the government has taken number of measures to dampen inflation, its key drivers are external and therefore more difficult to manage. While it remains a challenge to manage growth with inflation in the short term, the long-term growth prospects of the economy remain encouraging.

HDFC Mutual

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