Lehman Brothers sees India growing by 10 per cent or more annually over the coming decade. In a report titled 'India: Everything to play for,' the investment bank affirms its vote of confidence in the country's economic and social future.
According to the analysis, India's equity market will outperform developed and emerging market indices over the next five years, and the Indian rupee will appreciate significantly against the US dollar.
“India has learned a great deal from its structural policy reforms of the past decade; and we believe that these lessons will be carried forward, and built upon, in the coming years. We are confident of the economic and social future of India, and fully intend to play a large and growing part in its continued development,” Tarun Jotwani, chairman and chief executive officer, Lehman Brothers, India, is quoted as saying in a release.
Key points of the report:
(1) India's rapid economic growth bears all the hallmarks of the economic 'take-off' that took place in other large Asian economies in previous decades, such as China and South Korea, including rapidly rising GDP per capita, a high ratio of investment to GDP, and an increasingly open economy
a) Growth and structural reforms have started to interact dynamically b) Consumption, exports, and investment are feeding off one another, while improving fiscal finances and strong capital inflows are providing more resources for infrastructure spending.
(2) While business continues to prove impressively adept at negotiating systemic and structural challenges, sustaining higher growth in the medium term will require continuing structural reform - in particular, removing constraints such as weak infrastructure, bureaucracy, and labour market rigidities.
a) Breaking down these barriers is the key to enabling businesses to achieve increasing returns to scale by capitalizing on its global comparative advantages in labor-intensive manufacturing and agricultural exports.
(3) The liberalization of foreign trade and investment, and the rapid development of the financial sector are among the most important structural reforms.
a) These reforms, pursued against a backdrop of prudent macroeconomic management are contributing to a rising ratio of investment to GDP and increasing productivity growth
(4) Further, financial sector reforms could contribute 1-1.5 percentage points to long-term GDP growth, and boost net capital inflows from approximately $38 billion to over $200 billion within ten years.
a) With India's GDP per capita at approximately $1,000, with nearly 60 per cent of its workforce still in the countryside and with half of its population under 25 years old, India has enormous growth potential yet to be unlocked
(5) Given the powerful trends of demography and urbanization, India needs 'a faster and a more inclusive' growth strategy to correct its inter- and intra-regional imbalances and avoid social unrest.
a) Inclusive growth can be facilitated by further easing the shackles on business, by making education and health available to all and by developing the rural sector
b) Labour market reforms to spur the necessary job creation over the next decade will be a key challenge
(6) India's growing economic clout is encouraging a more proactive regional policy and greater engagement on the global stage, for example in trade liberalisation and the climate change debate, which also stand to boost economic growth.
By Lehman Brothers
Source: India Times
Forget yourself for others, and others will never forget you.
No comments:
Post a Comment