Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

<ul>
<li>Unlike the consensus, we weren't surprised by the 8.2%YoY real GDP growth in Jul-Sep'25, as the sharp moderation in inflation dampened the GDP deflator too. </li>
<li>We retain our forecast of 9%YoY growth in Oct'25-Sep'26, led by stronger PCE after the cut in GST rates and likely boost to farm incomes from the strong monsoon-fed crop. </li>
<li>With CPI inflation far below the 2-6% RBI target, policy rates will need to steadily decline, boosting GFCF. We expect 8.5% RGDP growth in FY26, and 8.2% in FY27. </li>
</ul>


Unlike the consensus, we weren't surprised by the 8.2%YoY real GDP growth in Jul-Sep'25, as the sharp moderation in inflation dampened the GDP deflator too. 
We retain our forecast of 9%YoY growth in Oct'25-Sep'26, led by stronger PCE after the cut in GST rates and likely boost to farm incomes from the strong monsoon-fed crop. 
With CPI inflation far below the 2-6% RBI target, policy rates will need to steadily decline, boosting GFCF. We expect 8.5% RGDP growth in FY26, and 8.2% in FY27. 


India: 8.2%YoY Growth in Q2FY26; to Accelerate to 9%YoY in Oct'25-Sep'26

<ul>
<li>RBI's MPC cut its policy repo rate by 50bp (to 5.5%, implying cuts totalling 100bp in the past half year), and also a phased 100bp cut in CRR by Dec'25. </li>
<li>Despite CPI inflation moderating below 3.2%YoY in Apr'25, the RBI has only slightly lowered its inflation forecast for FY26 to 3.7% (from 4%), and hence returned to a neutral stance. </li>
<li>Given an above-normal monsoon, already strong Rabi crop, and low crude oil prices, we expect CPI inflation to average less than 3%YoY in Jun-Dec'25, allowing 75bp of further rate cuts. </li>
</ul>


RBI's MPC cut its policy repo rate by 50bp (to 5.5%, implying cuts totalling 100bp in the past half year), and also a phased 100bp cut in CRR by Dec'25. 
Despite CPI inflation moderating below 3.2%YoY in Apr'25, the RBI has only slightly lowered its inflation forecast for FY26 to 3.7% (from 4%), and hence returned to a neutral stance. 
Given an above-normal monsoon, already strong Rabi crop, and low crude oil prices, we expect CPI inflation to average less than 3%YoY in Jun-Dec'25, allowing 75bp of further rate cuts. 


India: 50bp Rate Cut, 100bp of CRR Cuts Pave the Way for Faster RGDP Growth

<ul>
<li>RBI's failure to cut the policy rate at its last two policy meetings is a policy error. Although vegetables caused a headline-inflation spurt, core inflation moderated to 2.7%YoY in Sep'24. </li>
<li>High real interest rates have caused real GDP to decelerate to 6.7%YoY in Apr-Jun'24, and industrial output to decline in Aug'24. The policy error is hurting the economy. </li>
<li>Cleverer stance would be to take every opportunity to cut rates when headline inflation is at/below target. When vegetable prices hold policy hostage, it hits investor confidence. (Evidence: FX Reserves).  </li>
</ul>


RBI's failure to cut the policy rate at its last two policy meetings is a policy error. Although vegetables caused a headline-inflation spurt, core inflation moderated to 2.7%YoY in Sep'24. 
High real interest rates have caused real GDP to decelerate to 6.7%YoY in Apr-Jun'24, and industrial output to decline in Aug'24. The policy error is hurting the economy. 
Cleverer stance would be to take every opportunity to cut rates when headline inflation is at/below target. When vegetable prices hold policy hostage, it hits investor confidence. (Evidence: FX Reserves).  


India: Clear Policy Error Despite Food-Driven Spurt in Sep'24 Inflation

<ul>
<li>The fiscal deficit's 12mma was below 4.3% of GDP in Jul'24 (far below the 4.9% target for FY25), reflecting surging direct tax revenue and above-target non-tax revenue (dividends).   </li>
<li>Q1FY25 merchandise deficit expanded 10.5%YoY to US$62.08bn, as exports grew 6%YoY and imports 7.7%YoY. Services exports grew 10.6%YoY, services imports 6.9%YoY, widening the services trade surplus 15.4%YoY to US$40.52bn. </li>
<li>Given typical quarterly incomes surplus of US$14.4bn, the CAD in Q1FY25 likely declined 20%YoY to US$7.2bn, so H1CY24 CAD was US$1.5bn (vs US$10.3bn in H1CY23). Seasonality should eliminate FY25 CAD. </li>
</ul>


The fiscal deficit's 12mma was below 4.3% of GDP in Jul'24 (far below the 4.9% target for FY25), reflecting surging direct tax revenue and above-target non-tax revenue (dividends).   
Q1FY25 merchandise deficit expanded 10.5%YoY to US$62.08bn, as exports grew 6%YoY and imports 7.7%YoY. Services exports grew 10.6%YoY, services imports 6.9%YoY, widening the services trade surplus 15.4%YoY to US$40.52bn. 
Given typical quarterly incomes surplus of US$14.4bn, the CAD in Q1FY25 likely declined 20%YoY to US$7.2bn, so H1CY24 CAD was US$1.5bn (vs US$10.3bn in H1CY23). Seasonality should eliminate FY25 CAD. 


India Twin Deficit Watch: Fiscal Deficit Far Below FY25 Target, CAD Set to Vanish

<ul>
<li>11%YoY growth in GFCF enabled real GDP to grow 7.6% YoY in Q2FY24, well ahead of the 6.8% consensus. Manufacturing, construction, utilities and mining grew over 10%YoY in Jul-Sep'23. </li>
<li>Services should grow over 8%YoY in H2FY24 (in line with 26-year average). Manufacturing should grow 9%YoY, delivering 8%+ growth in H2FY24. Reform and productivity enable 8% growth in FY25. </li>
<li>The 12mma of the fiscal deficit fell to 5.8% of GDP in Oct'23, and should fall to 5.5% by Mar'24. This will crowd-in private investment, generating virtuous circle of growth.</li>
</ul>


11%YoY growth in GFCF enabled real GDP to grow 7.6% YoY in Q2FY24, well ahead of the 6.8% consensus. Manufacturing, construction, utilities and mining grew over 10%YoY in Jul-Sep'23. 
Services should grow over 8%YoY in H2FY24 (in line with 26-year average). Manufacturing should grow 9%YoY, delivering 8%+ growth in H2FY24. Reform and productivity enable 8% growth in FY25. 
The 12mma of the fiscal deficit fell to 5.8% of GDP in Oct'23, and should fall to 5.5% by Mar'24. This will crowd-in private investment, generating virtuous circle of growth.


India: Real GDP to Sustain 8%+ YoY Growth over the Next 18 Months

India

iShares MSCI India Index ETF is an exchange-traded fund registered in Singapore. The Fund seeks to provide investment results that, before expenses, closely correspond to the performance of the MSCI India Index. The Fund invests all or substantially all of its assets in shares comprising the MSCI India Index in substantially the same weightings as constituted in the underlying index.

iShares MSCI India Index ETF (INDIA SP)

India: 8.2%YoY Growth in Q2FY26; to Accelerate to 9%YoY in Oct'25-Sep'26

Expect real GDP growth of 8.5% in FY26 and 8.2% in FY27 as 2pp lower GST and strong farm incomes boost private consumption, while low inflation...

Prasenjit K. Basu

India: 50bp Rate Cut, 100bp of CRR Cuts Pave the Way for Faster RGDP Growth

We forecast 8.5% real GDP growth in FY26, with another 75bp of rate cuts by Dec'25 (after 100bp cuts in Feb-Jun'25) boosting fixed investment,...

Prasenjit K. Basu

India: Clear Policy Error Despite Food-Driven Spurt in Sep'24 Inflation

Veg prices can't be controlled by monetary policy, so RBI should've cut rates in Aug & Oct'24, with core & headline inflation below target. Policy...

Prasenjit K. Basu

India Twin Deficit Watch: Fiscal Deficit Far Below FY25 Target, CAD Set to Vanish

12mma fiscal deficit was below 4.3% of GDP in Jul'24, as direct tax revenue surged +20%YoY. 15%YoY rise in services surplus kept H1CY24 CAD down to...

Prasenjit K. Basu

India: Real GDP to Sustain 8%+ YoY Growth over the Next 18 Months

India stays world's fastest-growing economy with 7.7%YoY RGDP growth in H1FY24. Exports & GFCF will enable >8%YoY growth in H2. Labour reform to...

Prasenjit K. Basu

India: 8.2%YoY Growth in Q2FY26; to Accelerate to 9%YoY in Oct'25-Sep'26

​Expect real GDP growth of 8.5% in FY26 and 8.2% in FY27 as 2pp lower GST and strong farm incomes boost private consumption, while low inflation...

Prasenjit K. Basu

India: 50bp Rate Cut, 100bp of CRR Cuts Pave the Way for Faster RGDP Growth

We forecast 8.5% real GDP growth in FY26, with another 75bp of rate cuts by Dec'25 (after 100bp cuts in Feb-Jun'25) boosting fixed investment,...

Prasenjit K. Basu

India: Clear Policy Error Despite Food-Driven Spurt in Sep'24 Inflation

Veg prices can't be controlled by monetary policy, so RBI should've cut rates in Aug & Oct'24, with core & headline inflation below target. Policy...

Prasenjit K. Basu

India Twin Deficit Watch: Fiscal Deficit Far Below FY25 Target, CAD Set to Vanish

12mma fiscal deficit was below 4.3% of GDP in Jul'24, as direct tax revenue surged +20%YoY. 15%YoY rise in services surplus kept H1CY24 CAD down to...

Prasenjit K. Basu

India: Real GDP to Sustain 8%+ YoY Growth over the Next 18 Months

India stays world's fastest-growing economy with 7.7%YoY RGDP growth in H1FY24. Exports & GFCF will enable >8%YoY growth in H2. Labour reform to...

Prasenjit K. Basu

Expect real GDP growth of 8.5% in FY26 and 8.2% in FY27 as 2pp lower GST and strong farm incomes boost private consumption, while low inflation...