StanChart says India's real growth 'very elusive'

It appears that both the markets and analysts have resigned to the fact that the recovery will be much slower than anticipated, says Samiran Chakraborty

India’s real growth remains “very elusive” and markets have “resigned” to a slower recovery, while foreign investors are still optimistic for want of alternatives, British major Standard Chartered has said.

“A lot of macro parameters have improved for sure but growth has been very elusive. The new GDP (gross domestic product) numbers are puzzling. But on other active parameters, things still look to be challenging,” said Samiran Chakraborty, Standard Chartered managing director and regional research head for South Asia.

“The way we thought that growth will come back, it now appears that both the markets and analysts have resigned to the fact that recovery will be much slower than anticipated,” he added.

Foreign investors are very optimistic, he said, while attributing this to lack of alternatives and also their ability to see-through advantages the country has in the medium term, Chakraborty said.

A revision in the computation of GDP growth showed growth of 6.9 per cent in FY14 from the earlier five per cent. The government has been saying the country is the fastest growing economy in the world and is on course to clip at 7.4 per cent in the just-concluded financial year. However, factory output data, core sector numbers and exports and imports are all heading south.

On optimism of foreign investors, Chakraborty said: "Part of the reason is the so-called TINA factor (there is no alternative). But part of it is also the fact that sitting 10,000 km away, they can actually take a slightly medium-term perspective on us which is tougher for us sitting right here."

Investors derive optimism from factors like changes in the monetary policy framework which makes the Reserve Bank an inflation-targeting central bank, he said, adding that they also get the comfort that current account deficit is under control, among others.

When asked about what are the concerns being voiced by international investors, Chakraborty said one big concern is how fast a democracy can work.

"One of the concerns is that how fast can a democracy work, at what point of time will the government be forced to turn more populist, can reforms continue for long?" he said.

He further said that stiff political opposition, even from within the ruling front, to the issues being sought to be incorporated in the Land Acquisition Act or minimum support prices or rise in rural wages are things which investors are watching.