INSUBCONTINENT EXCLUSIVE:
Global brokerage Bank of America Securities cut growth forecasts for India and suggested a sharp benchmark rate cut to cushion the damage to
businesses from the coronavirus outbreak.
The broker trimmed India’s growth forecasts by 30 basis points(bps) to 4 per cent for the March
quarter and 80bps to 4 per cent for the June quarter on Covid-19 related shutdowns.
A large number of leisure, travel and hospitality
businesses have been hit hard due to preventive measures to close shops and malls.
BoFA Securities highlighted that high real lending rates
continue to exert a drag on growth
Although nominal bank MCLR has fallen 54 bps in the current fiscal till date on RBI easing, real MCLR has jumped 67bps with core WPI
inflation falling, it added.
“We expect the RBI MPC to cut rates by 25bps before or on April 3 with the FOMC cutting 150bps
Second, it will likely cut again in June with inflation set to fall to its 2-6 per cent mandate
Finally, we expect the RBI MPC to cut in October as base effects and weak demand will likely drag inflation down to 2.5 per cent in
2HFY21,” it said in a note.
The report prepared by Indranil Sen Gupta and Aastha Gudwani said BofA India Activity Indicator continues to
But it added that shutdowns needed to contain the Covid-19 outbreak will likely pull down activity.
India's GDP growth slipped to a nearly
7-year low of 4.7 per cent in October-December 2019, weighed by a contraction in manufacturing sector output