New Delhi, January 13 (IANS). India is currently in a balanced phase of rapid economic growth and low inflation, which economists are calling the ‘Goldilocks phase’. An HSBC report released on Tuesday said that now the policies should be neither too strict nor too loose, but a balanced i.e. almost neutral policy should be adopted.
HSBC Global Investment Research’s report said that to support the market and the entire economy in 2026, such a policy would be best in which government expenditure is controlled and at the same time interest rates remain easy.
According to the report, if the government is careful in spending and the Reserve Bank keeps the interest rates easy, then it will create a better balance in the economy and all types of investments will benefit.
However, the report also warned that some internal weaknesses still exist in the economy. These include less investment by companies and less capital coming from abroad, which are important to pay attention to.
The report said bond markets have already factored in the possibility of states taking on more debt as early as 2026. Along with this, foreign investment is expected to come due to bond purchases by RBI, fiscal discipline in the budget and India’s inclusion in the global bond index.
According to the report, the stock market may benefit due to recent economic reforms, increase in GDP and reasonable share prices. But to achieve long-term benefits, major reforms that increase corporate investment and foreign investment are necessary.
HSBC’s Chief India Economist Pranjul Bhandari argued that according to his research firm’s estimates, the inflation rate next year will be slightly less than four percent, due to which there will be no pressure on the RBI to increase interest rates and if the pace of growth slows down, there will be scope to reduce interest rates further.
He further said that if the growth rate weakens, more relief can be given. This situation is completely contrary to the current market sentiment, where people are expecting tight monetary policy and loose fiscal policy.
Pranjul Bhandari also said that there are many events going on across the world, such as tariff related news, the process of joining global bond indices and rising interest rates in developed countries, which can impact the Indian market.
The report states that the central government aims to bring public debt to pre-pandemic levels by 2031. For this, continuous financial reforms and control on expenditure will be necessary for the next five years.
According to the report, this financial balance done by the central government can be accomplished through privatization, which will not have much impact on economic growth.
The report also said that public debt is likely to increase in many states, although the deficit will be kept under control due to the fiscal deficit limit of 3 percent.
–IANS
DBP/AS