As I travel across Europe, it appears that FIIs are keen to buy into the story that India is an oasis of safety in a sluggish global economy. Whilst it would be unfair to call India a mirage, investors would do well to discard the notion of India being a safe haven. There are at least three clear and present signs of danger in India: The second derivative of a battery of high frequency data series in India suggests that the economic growth has been slowing down over the past 3-4 quarters (click here for detailed note published on 26 Oct 2015). Our composite indicator of economic growth in India also gives the same message (click here for India’s Le Keqiang index). Policymaking in New Delhi – usually a good lead indicator of GDP growth – seems to be slowing down as well. Click here for our 26 Oct note, “Policy Paralysis Redux”. The pain seen in the Balance Sheets of lenders, banks & non-banks, is deepening as evidenced by recent results from M&M Financial Services, Federal Bank and Axis Bank. Stressed assets for the banking system are already at 13% and rising. We estimate GDP growth to be 6.8% in FY16 and ditto in FY17. Consensus obviously is projecting a more “oasis-like” scenario.
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