India expected to remain positive outlier in 2024: Report

Global economy: We see the US economy slowing materially, yet skirting recession in 2024 and Europe and the UK facing stagnation. China is expected to slow further in 2024, adding challenges to overall Asia ex-India. India is expected to remain a positive outlier, the report by Elara Securities said. The report also highlighted that India is manifesting an increase in indigenous manufacturing, improved resilience to crude oil prices, and a rise in total factor productivity amid sustained enhancement in capital formation.

“We project FY25E growth at 6.9-7 per cent, inflation at average 4.5 per cent, policy rate 5.75 per cent by March 2025E, USD-INR 81 and 10-year yield 6.8-7.15 per cent,” the report highlighted. According to the report, domestic private consumption and trade risks are likely risks to FY25 growth. 

Inflation 

The report went on to add that inflation is to come down incrementally globally, but the core inflation downtrend is likely to be stickier than the headline. 

“Bias for oil prices continues to be on the lower side. Food prices are a key risk,” Elara Securities cautioned. In the last few years, inflation has emerged as a big pain point for the economies across the world.  Retail inflation in India was at its highest level because of pandemic-induced disruptions. 

Rate Cuts

Throwing light on rate cuts, the report said, “We see 2024 as the year of rate cuts across the global economy, with developed markets (DMs) cutting at a faster clip than emerging markets (EMs) to traction growth.”

As per Elara Securities, a 100 bps rate cut is expected by the Fed, 75bps by the RBI, and 125-150bps by the ECB and BoE. BoJ is likely to go the other way – we see BoJ abandoning Yield Curve Control and lifting policy rates in 2024.