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'Bank recap to lift GDP growth to 8% next fiscal'

Tuesday, November 28, 2017

The economy is likely to clip at 8% next fiscal as the massive bank recapitalisation will help revive the long-stalled credit demand and private investments, says a brokerage report. According to Wall Street brokerage Goldman Sachs, the Rs 2.11-trillion bank recapitalisation announced by government last month and a likely recovery in earnings are also likely to drive up the stock markets and has set the Nifty target of 11,600 by next December.

"We project above-consensus real GDP growth of 8% in 2018-19, while we see a growth of 6.4% for 2017-18, as the negative impact from shocks (demonetisation and GST implementation) this year fade and the bank recap programme unlocks credit and private investment growth," it said yesterday.

It said CPI inflation is likely to rise above the mid-point of RBI target to 5.3% in FY19 due to a pick-up in food and commodity prices, and so it expects RBI to hike policy rates by 75 basis points by mid-2019.

Keeping a "overweight" view on the stock markets, Goldman Sachs chief Asia Pacific regional equity strategist Timothy Moe told reporters that, "Nifty is estimated to hit 11,600 by December 2018 from the current levels with earnings growth to be the key propellant".

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