Indian economy will begin to recover from the middle of this year, thanks to the fiscal and monetary measures taken up by the government, but the outcome of the ongoing general election remains a legitimate concern, global research firm Macquarie has said.
Macquarie said, "Our view remains that the largely domestically-driven Indian economy will begin to recover palpably from mid-year onwards."
The double-cylinder fiscal and monetary response has been aggressive and already paying dividend, the research firm said but added that "political uncertainty over the outcome for the ongoing general election remains a legitimate concern".
The other factors likely to contribute include that India is relatively less dependent on exports, its export profile is not heavily dependent on electronic or automotive shipments and the domestic fiscal and policy response has been aggressive and effective.
Macquarie further said the Reserve Bank of India appears to be approaching the end of the policy rate-cutting cycle, but banks have more room to cut their lending rates more aggressively, which in turn should boost economic activity.
"Indeed, the broader setting is evolving nicely to position the economy for a better second-half of FY10. Currently, we forecast a full-year GDP growth of 5.5 per cent for FY10 following an estimated 6.5 per cent in the last fiscal year," Macquarie said.