India’s economy may soon enter a phase of visible recovery, with signs likely to emerge within the next three to four months, according to Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital.Mishra expects growth to improve gradually, driven by a reduction in fiscal constraints and a clearer policy direction from the central bank. He highlighted that contrary to popular belief; the government was not actively pushing growth over the past two years. Instead, it was focused on reducing the fiscal deficit—a move that, while necessary, temporarily weighed on the economy.
In the last two fiscal years, the government undertook aggressive fiscal consolidation, lowering the deficit by 80 basis points annually. This year, the consolidation is expected to be more modest, around 40 basis points, and even less in the following year—roughly 15–20 basis points.
This tapering of fiscal tightening, Mishra suggested, should reduce the drag on economic momentum, creating a more supportive environment for growth.On the monetary front, Mishra noted that while policy easing had already begun, its impact had been slower to materialise due to delayed transmission. However, the Reserve Bank of India (RBI) and the Monetary Policy Committee (MPC) have become more assertive in communicating their intent to support growth.Read Here | Citi prefers India among emerging markets, sees US as fairly valuedOnce a few lenders begin cutting rates to attract borrowers and mobilise deposits, Mishra expects this to trigger a broader pickup in credit activity. This could set off a positive cycle, gradually reviving the economy.While high-frequency indicators may not yet reflect this anticipated improvement, Mishra stated the importance of looking ahead. “There is global uncertainty and noise, but India’s growth is primarily driven by domestic factors,” he said, reinforcing his confidence in the country’s internal growth engines.Highlighting his sector preferences, Mishra pointed to real estate, cement, and financials as the most promising areas going forward. Despite some valuation concerns in specific stocks, he said these segments broadly remain well-positioned for a cyclical upturn.For full interview, watch accompanying videoFollow our live blog for more stock market updates
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