Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

PK Basu has 34 years experience covering Asia's economies and markets (equities, fixed income and currencies), including 20 years covering the global economy. He was Chief Economist (SE Asia & India) at Credit Suisse First Boston for 5 years, and Chief Asia (x-Jpn) Economist at Daiwa Securities for a similar period. Among other roles, he was global head of research at Maybank Kim Eng, Malaysia equity research head and chief ASEAN economist at Macquarie, Chief Economist at ICICI Securities, ASEAN economist at UBS and the first chief economist at Khazanah Nasional (where he was co-head of research, and led all agri-business initiatives). PK Basu started his career in the Asia Service of WEFA (Wharton Econometrics) in Philadelphia in 1990, rising to be Director of their Asia Service in June 1994. 
PK's book, "Asia Reborn: A continent rises from the ravages of Colonialism and War to a New Dynamism" won the Tata Literature First Book Award (non-fiction) for 2018. It is the first single chronicle of the modern economic and political history of the whole of Asia (from Iraq and Turkey to Korea and Japan, and everything in between), told from an Asian perspective.

Chief Economist & Political Strategist

RBI Raises Rates, but Will Likely Look Foolish when Inflation Moderates

The Investment-Led Rebound Accelerates to 7.7% Real GDP Growth

The Investment-Led Recovery Has a Broader Base, and Corporate Earnings Are Gaining Too

REAL-Economics.com

Macroeconomics

The consensus expectation is that the world's fastest-growing economy, India, will decelerate markedly from the 8.2% YoY growth recorded in 1Q-FY2018/19 (Apr-Jun 2018) and 7.7% YoY in the previous quarter. The consensus is wrong. The government's net market borrowing is down 22.3% YoY in April-August 2018, freeing up ample loanable funds for the private sector. After four years of sluggish credit growth as banks' balance sheets were painstakingly cleansed, bank credit is up 12.9% YoY, and is likely to accelerate. This "crowding-in" of private investment spending will continue to boost India's economy through the rest of FY2018/19. Real investment spending rose 10% YoY in April-June 2018, and the 28% YoY growth in commercial vehicle sales in August 2018 (despite disruptions caused by severe floods in Kerala) suggests that the investment rebound is continuing into the current quarter. We consequently expect real GDP to grow 8% in FY2018/19 (well above the RBI's estimate of 7.4%, which is aligned with the consensus).Headline CPI inflation is likely to continue moderating, given tight monetary conditions (9.9% M3 growth in August 2018, and real interest rates of +2.3%, among the highest in the world). Excluding energy inflation (+18% YoY in July 2018), there is precious little inflation elsewhere: the normal (and well-distributed) monsoon across 70% of India should keep food inflation well contained, thereby precluding further rate hikes by the hawkish RBI. Manufacturing value-added rose 13.5% YoY in 1Q-FY2018/19, and construction 8.7% YoY. Growth through the rest of FY2018/19 will be better distributed, with services accelerating. As the US-China trade war ratchets up, India's exports of goods and services are likely to strengthen, providing an additional spur to growth.

The consensus expectation is that the world's fastest-growing economy, India, will decelerate markedly from the 8.2% YoY growth recorded in 1Q-FY2018/19 (Apr-Jun 2018) and 7.7% YoY in the previous quarter. The consensus is wrong. The government's net market borrowing is down 22.3% YoY in April-August 2018, freeing up ample loanable funds for the private sector. After four years of sluggish credit growth as banks' balance sheets were painstakingly cleansed, bank credit is up 12.9% YoY, and is likely to accelerate. This "crowding-in" of private investment spending will continue to boost India's economy through the rest of FY2018/19. Real investment spending rose 10% YoY in April-June 2018, and the 28% YoY growth in commercial vehicle sales in August 2018 (despite disruptions caused by severe floods in Kerala) suggests that the investment rebound is continuing into the current quarter. We consequently expect real GDP to grow 8% in FY2018/19 (well above the RBI's estimate of 7.4%, which is aligned with the consensus).Headline CPI inflation is likely to continue moderating, given tight monetary conditions (9.9% M3 growth in August 2018, and real interest rates of +2.3%, among the highest in the world). Excluding energy inflation (+18% YoY in July 2018), there is precious little inflation elsewhere: the normal (and well-distributed) monsoon across 70% of India should keep food inflation well contained, thereby precluding further rate hikes by the hawkish RBI. Manufacturing value-added rose 13.5% YoY in 1Q-FY2018/19, and construction 8.7% YoY. Growth through the rest of FY2018/19 will be better distributed, with services accelerating. As the US-China trade war ratchets up, India's exports of goods and services are likely to strengthen, providing an additional spur to growth. 

Rebounding Investment Boosts the Fastest Growing Economy to 8.2% YoY Growth: Strength to Persist