According to DBS, India currently enjoys an ideal mix of political stability, a credible central bank, reform-centric focus and catalysts for growth to recover.
“We reckon time is ‘RIPE’ for growth to climb out of the current slowdown and return towards its potential rate over the next two-three years,” Radhika Rao, Economist at DBS Group Research said.
According to DBS, timely rollout of ‘R’eforms, jumpstarting ‘I’nvestments and ‘P’roactive efforts to guard against rising external risks will return the economy to a healthy and steady ‘E’xpansion mode.
Regarding reforms DBS said, rather that rollout of another bunch of fresh reforms, there is value in ensuring efficient and effective implementation of the already announced measures.
“Even in the absence of fresh ‘big bang’ reforms, smoother execution and implementation of already rolled out reforms will benefit the economy,” it said and cited examples of already announced reforms like Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC).
Another key focus area should be reviving the investment climate, which has been moderating for the past five-six years, Rao said.
Besides the domestic agenda, authorities will be required to take proactive efforts to guard against rising external risks.
Multiple headwinds have emerged over the course of first half of 2019, led by a rising protectionist tide across economies as US-China trade dispute escalates, moderating in in G7 growth, sluggish global trade, Brexit-led uncertainty, volatile oil prices and slower China, the report said.
“Developments on the US-China trade dispute and other protectionist policies, present both a challenge and opportunity for India,” it added.
According to Rao, return to faster expansion mode for the Indian economy is on the cards.
“India’s macroeconomic vulnerabilities have improved sharply vs 2013 taper tantrum and better than 2018. Current account deficit is primed to stay below 3 per cent of GDP for the seventh consecutive year in 2019,” the report said.
The structural need to raise potential growth to provide for the economy’s rising employment needs, higher savings rate and in turn, boost investment capacity through domestic resources, should remain a priority.
Hence as highlighted in this report, the combination of effective reforms and improved productivity, are crucial ingredients for the economy to return to potential growth and accelerate further, the report added.