Looking closely, we find that India’s inflation is well controlled, ATH FX reserves have acted well as a shock absorber against volatility, and our GDP growth expectations is one the highest in the world!
Added to that India’s weight in the MSCI Emerging Market index has increased substantially in the past 2 years showing signs of investor confidence, while other prominent emerging country weights have been dropping.
In times of slowdown, currency reflects the true strength of macro fundamentals. Japanese yen, Euro, Swiss franc, and British Pound have depreciated much more than the rupee making the rupee one of the best performing in the world.
Based on the RBI’s assessment, the Real GDP projection is retained at 7.2% for FY23. This comes on the back of strong investment activity, improving bank credit and rising capacity expansion.
With the introduction of the Asset quality review in FY15-16, banks' asset quality has been under pressure. This was further aggravated by events such as demonetisation, GST, and the IL&FS crisis. As a result, the GNPA ratio for Banks rose to 11.2% in FY18 vs 4.3% in FY15. (3/8)
We saw that the commodity prices were increasing, reforms such as the Electricity Act came into play and government spending grew at a rapid pace of 23% CAGR. This led to overall growth in the capital cycle
M2 which is a broad measure of money supply, has grown 81% in the last 7yrs to nearly $20Trn. An increase in the supply of money typically lowers interest rates, which generates more investment and puts more money in the hands of consumers. Hence stimulating spending.
Bonds struggled during the last major stagflationary period, in the late 1960s. Rise in oil prices,unemployment, loose monetary policy pushed the core CPI Index to a high of 13.5%. The Fed had to raise interest rates by nearly 20%.