You are here: Home » Economy & Policy » News
Business Standard

HSBC report on investment growth: Pace of revival to be gradual for few yrs

Investment growth may have bottomed out in 2016 due to demonetisation, said the report

Press Trust of India  |  Mumbai 

hsbc

After a six-year wait, private rates seems to have bottomed out in 2016 but the pace of its revival is expected to be gradual over the next few years, says a report.

According to global brokerage HSBC, the pace of investment growth, especially over 2017, "may not be rapid" and would only "cross the 7 per cent ballpark, which is when the investment rate is expected to stabilise, around 2020."

"We find that things were beginning to get somewhat supportive of a recovery in mid-2016. But, alas, the economy was hit by the unexpected shock in November 2016," said.

"Policy uncertainty rose and alongside, the twin balance sheet problem worsened. Hopes of a strong investment revival in 2017-18 are likely to be disappointed," it added.

Estimating the timeline for investment recovery as shock has now waned out, said may have bottomed out in 2016.

"This claim seems to have some support from the housing sector, which has become a policy focus in recent months and, if done right, can be an effective driver, given its linkages with the rest of the economy," it said.

"However, our model also suggests that pace of investment growth, especially over 2017, may not be rapid," it added.

HSBC's investment model is based on four variables- policy uncertainty, expectations of future returns, the twin balance sheet problem, and world growth - do a rather good job in explaining the ups and downs in investment.

RECOMMENDED FOR YOU