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The global economic slowdown.

Among developing markets/Asia, India's relative condition stands out. According to IMF data, India will be the fastest-growing Asian economy in real terms in 2022, and the only Asian country to expand in double digits nominally.

According to the paper, India's development momentum is partially stronger because it has taken a more open economy approach to Covid than China, which has taken a "zero Covid" policy.

According to Jefferies, the global economic slowdown, aided by a possible China slowdown through 2022, presents a perfect situation for India. Global benchmark prices for petroleum (9%), steel (26%), and coking coal (47%), for example, have already fallen from recent highs. Because India is a net importer of several commodities, lower pricing trends benefit India's imports, lowering inflation and putting downward pressure on the INR.

Domestic rate hikes will most likely be modest as a result of this; South Korea, Brazil, and Russia are among the nations that have already begun to raise rates. India has thus far resisted hiking its policy rates, however this is expected to change in 1HCY22. According to Jefferies, an analysis of six major components of the economic cycle reveals that circumstances are ideal for the commencement of a big cyclical upturn in India. Housing, nonperforming loans, and corporate profitability cycles all turned positive in 2021, and these cycles have historically lasted 6-10 years.

Corporate leverage is at a cyclical low, allowing corporations to take large investment risks. The larger capex cycle has not yet flipped, but it normally lags behind the housing cycle. "Interest rates will most certainly rise, but this will not be a concern in the early stages of the cycle. In FY23, we anticipate India's GDP to expand at least 7% "According to Jeffries.

In India, the housing cycle lasts 6-8 years, and after a dip in 2013, the cycle has clearly flipped in 2021. Inventories have fallen to eight-year lows as new product releases have yet to catch up with rapidly expanding sales, which should lead to price hikes and a continuation of the cycle. The other significant change is in bank balance sheets, where gross nonperforming loans (NPLs) have decreased from 12 percent in March 2018 to 7% presently, and net nonperforming loans (NPLs) have decreased by 59 percent, despite a provisioning increase. As a result, banks' ability to lend has increased significantly.

Over the period FY11-FY20, corporate profit growth was abysmal, with a CAGR of only 0.4 percent. With a 51% increase in earnings from FY20 to FY22, the tide has turned.

Also read: Indian Economy in “Transition”

In 2021, the Indian housing industry recovered from an eight-year slump as volumes increased following COVID, owing to record low home loan rates and a demand for larger homes.

According to Propequity, home sales in the Top-7 cities have surpassed 400 million square feet for the first time since 2013. We think that housing demand will remain robust in 2022, potentially increasing by 10% or more year over year. The early recovery was fueled by a surge in premium and luxury home sales. However, as India's economic recovery deepens and non-salaried sector jobs return, Jefferies believes that demand for inexpensive homes would increase. (IANS/PR)

(Keywords: India, economic supercycle, 2021, 2022)



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