'Have not thrown in the towel', says Credit Suisse on economy

Says similar sentiment prevailed in mid-2012

It may not all be gloom-and-doom for the Indian economy. 

 

International brokerage Credit Suisse suggested that there are still reasons to remain positive despite the slew of negativity surrounding current conditions. 

 

It suggested that the damage may not be as bad as it is expected to be while agreeing that liquidity, politics, and currency have had their share of bad news in a report dated August 12th and authored by Research Analyst Robert Prior-Wandesforde.

 

“Admittedly we have cut our 2013/14 year average GDP growth forecast to 6% from 6.5%, while also lowering our 2014/15 projection…to 7%. But this still leaves us at the top of the consensus range,” said the report entitled, ‘India:Recovery Cancelled?’

 

The brokerage explained its relative optimism on the grounds that the damage of tighter liquidity will be limited so long as the commercial lending rates do not rise significantly. 

 

“…as long as the increase in interbank and commercial paper rates are not precursors to a higher repo rate and/or a sizeable rise in commercial bank lending rates the damage is likely to be limited. This is our central view but does depend on the policy authorities acting in a quick and credible fashion to shore up the currency,” it said. 

 

The brokerage compared the current situation to the one seen in the middle of 2012 and said the economy has more upside now than before.

 

“…we believe the fundamentals are clearly more supportive of activity in 2013/14 than they were in 2012/13, suggesting economic growth should also be meaningfully stronger,” said the report.