Chillin' out till it needs to be funded
What we think: less rate hikes, more liquidity, removal of stimulus
If you are still bothered more about the India china story as read by the sturdy and stable Indian system that refused to buckle in 2008 and 09 the crisis has still not gone away as India gets ready for a tough year to battle inflation and liquidity hotspots and Foreign portfolio investors find a temporary oasis of choice in US and even some European idylls to spread risk and still get a good growth kicker for the investments.
In simpler terms, the later part of January will see RBI underlining its non quixotic and discernably serene outlook when they sidestep the inflation monster and without going 9g and 5g rolls on combating liquidity. While some rate hikes are inevitable, RBI seems finally unlikely to head to unnecessarily structuring a higher orbit for the world’s likely largest consumption economy. Despite inflation which in some ways addresses rural inequity as it concentrates on food inflation and which highlights continuing reforms in food security may unlikely be overtly emphasised as the Indian M2 and inflation are not controlled by RBI diktat as much. Rate hikes will be restricted to 75-125 bp for the year ( Sameer of SCB is looking at 75bp) and the hope from our corner of the world is that Duvvoori Rao will likely commit to further CRR and SLR reform concurrent to removing artificial stimulus.
Though additionally even the young stable at Advantage zyaada notes with shock and awe that both India and China are in a much more market friendly mode already this time around and the policy makers on both sides of the Macmahon will hold on to their steed by just watching and selectively resonding to the open debate now on network television.