Key Points
Ahead of this week's scheduled review meeting of the Monetary Policy Committee (MPC), market watchers and investors are keen to know the timeline for India's rate easing cycle..
However, the texture - and driver - of India's robust economic growth rates suggest their wait will perhaps be of some duration..
The durability of a phase of growth anchored in the addition of fresh capacity is well credentialed from the 2002-2007 expansionary cycle when India first began to pour money into rebuilding its then rickety public infrastructure and fuel a boom in industries as diverse as telecom, surface and maritime transport, mining, metals, aviation, and consumer discretionary industries...
"We highlight risks of a potential delay and/or risk of no easing driven by better-than-expected trends in growth, capex and productivity. which will imply higher neutral real rates," Morgan Stanley said in a note to its clients while highlighting it now expects a rate decision only in the third quarter of this calendar year...
The Morgan Stanley study traces the real rates - currently below 150 basis points - to as far back as two decades to include a period that coincides with the previous major capex cycle...
