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>India's real policy rate was +0.55% in Dec'22, as CPI inflation receded to 5.72%YoY, within the RBI's 2-6% inflation target for the second consecutive month. No more rate hikes likely. </li>
<li>Industrial output expanded 7.1% YoY in Nov'22, with consumer nondurables output up 8.9%YoY -- tentative sign of a turnaround in consumption after a half-year of sluggishness. Consumer durables rebounded too. </li>
<li>After a stagnant decade, capital goods output expanded 20.7%YoY in Nov'22 (+14.9%YoY in Apr-Nov'22), capital goods imports +15.4%YoY. Rebounding GFCF will ensure 7.5% RGDP growth in FY23, 7.2% in FY24.</li>
</ul>


India's real policy rate was +0.55% in Dec'22, as CPI inflation receded to 5.72%YoY, within the RBI's 2-6% inflation target for the second consecutive month. No more rate hikes likely. 
Industrial output expanded 7.1% YoY in Nov'22, with consumer nondurables output up 8.9%YoY -- tentative sign of a turnaround in consumption after a half-year of sluggishness. Consumer durables rebounded too. 
After a stagnant decade, capital goods output expanded 20.7%YoY in Nov'22 (+14.9%YoY in Apr-Nov'22), capital goods imports +15.4%YoY. Rebounding GFCF will ensure 7.5% RGDP growth in FY23, 7.2% in FY24.


India: Growth on Track Even as Inflation Abates; No More Rate Hikes Likely

<ul>
<li>After 9.7%YoY growth in 1HFY23, we expect real GDP growth of 7.5% for the full FY23, led by investment spending, which is being crowded-in as the fiscal deficit stays contained. </li>
<li>Nominal GDP grew 16.2%YoY in 2QFY23, bolstering government revenue and corporate earnings. The fiscal deficit in Apr-Oct'22 was 45.6% of the FY23 target, having already exceeded budget targets in Apr-Oct'19&amp;'18.</li>
<li>With Brent crude prices falling below US$85/bbl, CPI inflation is likely to be below 6% YoY in Jan-Mar'23. We expect 7.3% real GDP growth in FY24 despite the OECD recession. </li>
</ul>


After 9.7%YoY growth in 1HFY23, we expect real GDP growth of 7.5% for the full FY23, led by investment spending, which is being crowded-in as the fiscal deficit stays contained. 
Nominal GDP grew 16.2%YoY in 2QFY23, bolstering government revenue and corporate earnings. The fiscal deficit in Apr-Oct'22 was 45.6% of the FY23 target, having already exceeded budget targets in Apr-Oct'19&amp;'18.
With Brent crude prices falling below US$85/bbl, CPI inflation is likely to be below 6% YoY in Jan-Mar'23. We expect 7.3% real GDP growth in FY24 despite the OECD recession. 


India: Investment-Led Growth Crowded-In as Government's Fiscal Deficit Is Contained

<ul>
<li>FOMC raised the FF rate by 75bp for the third consecutive time, taking it to 3-3.25% as expected. We expect the Fed Funds rate to peak at 5% in Mar’23.</li>
<li>The more aggressive monetary tightening by the US (outlined in the SER) will likely bring forward the US recession to Q2CY23 (two quarters ahead of our previous forecast). </li>
<li>USD will continue to strengthen, weakening the prospects for emerging markets. India, Indonesia, Vietnam will be safe havens, and Japan will continue riding the weak Yen. Avoid EM-creditor China. </li>
</ul>


FOMC raised the FF rate by 75bp for the third consecutive time, taking it to 3-3.25% as expected. We expect the Fed Funds rate to peak at 5% in Mar’23.
The more aggressive monetary tightening by the US (outlined in the SER) will likely bring forward the US recession to Q2CY23 (two quarters ahead of our previous forecast). 
USD will continue to strengthen, weakening the prospects for emerging markets. India, Indonesia, Vietnam will be safe havens, and Japan will continue riding the weak Yen. Avoid EM-creditor China. 


FOMC Acknowledges Its Policy Error and Will Front-Load Rate Hikes

<ul>
<li>Amid a global deceleration, India's real GDP grew 13.5%YoY in Apr-Jun'22, led by GFCF(+20%YoY) and PCE(+26%YoY). Actual growth was under-estimated because of errors in deflators for GDP and net exports. </li>
<li>Nominal GDP growth of 26.7%YoY enabled corporate tax revenue to rise 35%YoY and income taxes 50%YoY, bringing the 12mma of the fiscal deficit down to 6.1% of GDP. </li>
<li>As the government's market borrowing declines, it will crowd-in more private investment, enabling real GDP to grow 8% in FY23 despite the global slowdown. Stay Overweight. </li>
</ul>


Amid a global deceleration, India's real GDP grew 13.5%YoY in Apr-Jun'22, led by GFCF(+20%YoY) and PCE(+26%YoY). Actual growth was under-estimated because of errors in deflators for GDP and net exports. 
Nominal GDP growth of 26.7%YoY enabled corporate tax revenue to rise 35%YoY and income taxes 50%YoY, bringing the 12mma of the fiscal deficit down to 6.1% of GDP. 
As the government's market borrowing declines, it will crowd-in more private investment, enabling real GDP to grow 8% in FY23 despite the global slowdown. Stay Overweight. 


India: De-Leveraged, and Hence Set on a Path of Investment-Led Growth

<ul>
<li>In the first 9 months of FY2021/22, the fiscal deficit was 50% of the budgeted estimate for the full-year. More realistically, this year's fiscal deficit will be 5.7% of GDP. </li>
<li>Given more credible revenue estimates, the deficit for FY2022/23 will decline to 4.9%  of GDP. The government's lower borrowing requirement will help crowd-in private investment. </li>
<li>A 35%YoY increase in public investment will fund a multimodal connectivity rollout, while carbon-fibre will reach all villages, solar and 5G will be harnessed to create a tech virtuous circle. </li>
</ul>


In the first 9 months of FY2021/22, the fiscal deficit was 50% of the budgeted estimate for the full-year. More realistically, this year's fiscal deficit will be 5.7% of GDP. 
Given more credible revenue estimates, the deficit for FY2022/23 will decline to 4.9%  of GDP. The government's lower borrowing requirement will help crowd-in private investment. 
A 35%YoY increase in public investment will fund a multimodal connectivity rollout, while carbon-fibre will reach all villages, solar and 5G will be harnessed to create a tech virtuous circle. 


India: Budget Aims to Generate Concentric Virtuous Circles & Crowd-In Private Capex

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: Growth on Track Even as Inflation Abates; No More Rate Hikes Likely

Real policy rate of +0.55% ensures no rate hikes are likely this year, as food & energy inflation recede. Rebounding capital goods output & imports...

Prasenjit K. Basu

India: Investment-Led Growth Crowded-In as Government's Fiscal Deficit Is Contained

With the fiscal deficit well-contained, GFCF is being crowded-in -- now 21% higher than the pre-Covid quarter 3 years ago. Lower Brent will allow...

Prasenjit K. Basu

FOMC Acknowledges Its Policy Error and Will Front-Load Rate Hikes

FOMC has tightened 300bp in Mar-Sep'22 & is set to tighten another 125bp by end-22. US recession will likely begin Q2CY23. Avoid stagflationary...

Prasenjit K. Basu

India: De-Leveraged, and Hence Set on a Path of Investment-Led Growth

Real GDP will grow 8% in FY22/23 as strong nominal GDP (+26.7%YoY in Apr-Jun'22) bolsters tax revenue, lowers the fiscal deficit and crowds in...

Prasenjit K. Basu

India: Budget Aims to Generate Concentric Virtuous Circles & Crowd-In Private Capex

Revenue receipts in Apr-Dec21 reached 96% of the FY2021/22 target, while spending was merely in line. With deficits declining this year & next,...

Prasenjit K. Basu