So much happens on both the global and the Interior Front. First let’s talk about things at home. Where is this likely revision of GST rates, in combination with the support of other measures from the government, including a reduction in income tax and rate reductions by the RBI, on the road? What is your estimated GDP projection?
Chetan Ayaya: The cumulative policy measures that the government has taken, we first received the income tax reductions and for that we had the capital expenditures that grow on the part of the central government and the government side and then we received the RBI rate reductions and now finally the GST reduction. All these measures in total would use the domestic demand meaningfully. There is clearly some delay in all these measures to achieve growth numbers, but we think that from the third quarter of this year, probably by September-October, we should see clear signs of domestic question.
If you think about it, from all factors, the most important policy percentage was reduction of RBI. Usually in three four months after reducing the policy percentage, it will be overlooked to the loan percentages and there is still a three-four months delay from that time, which would imply that September-October would be the time when you should see meaningful support in the growth of that monetary policy with the Lag. So yes, all these factors should support the domestic demand repair.
However, we have a delay in growth, but that is mainly due to the delay in trade. It is likely that if the trade slows down, there will be some negative implications for the private investment side and therefore we expect that growth will delay about 6% by the quarter of December and then recover from the first quarter of 2026, ie the quarter ends March 2026 because by that time you have seen a multiple transmissiveness and the RBI and the RBI and the RBI has been released and the RBI and the RBI and the RBI has been released and the RBI and the RBI and the RBI and the RBI has been relieved of the relief And the RBI has taken over and the RBI has adopted and has adopted the RBI and has adopted the RBI and has seen the RBI and that of world trade, that is also close to the policy of policy. delay.
What should the inflatoar impact, should the rates come by and of course GST rationalization?
Chetan Ahya: For India, the challenge will be low inflation. We have already seen that the core inflation is less than 4% and if you look at WPI that is equal to PPI everywhere else in the world, that has also been quite weak. So yes, in some respects there will be reduced inflation. But this reduction in inflation because of GST must be seen more as a positive source of disinflation instead of something that must be considered negative. The deflatory pressure we saw because of the deflation of China and the delay in global trade, that is what we would call it negative. But the one we are going to see because of GST cuts should be seen as a positive support for the economy.
Will that leave the RBI? Do you expect further to relax or will the status quo remain for the rest of the year?
Chetan Ahya: We think that RBI will reduce the rates in the policy meeting in October and we also emphasize the risk that if the disinflatory pressure of the rest of the world will intensify, RBI will have a room to lower a speed alongside the person they will do in October.
That is your expectation of the RBI. But what about the Fed because there is so much pressure structure of Trump on the FED chair in the hope of getting a rate reduction. Do you think that could be possible in the September meeting?
Chetan Ahya: Our position is that there will be no rate reduction in September, but it is very based on the next job print. We will also see what Chairman Powell mentions today in the Jackson Hole meeting or event, because if the chairman indicates that the revision in Banengendunt is a concern, this can seal the expectation of a rate reduction in the September meeting. But it is possible that the chairman still indicates that the unemployment rate is relatively low. In the last press conference, the chairman was very focused on the unemployment rate and that was not changed to the last print despite the revision of the non-farming letter letters. We will see on which chair Powell decides to concentrate. We currently think that the August’s print will be very important for the Fed, whether they were cut or not in September.
What kind of signals is the bond market that currently gives to investors, because we see mixed movement, although the 10-year yields seem to fall slightly while the 30-year yields are seen as rising.
Chetan Ahya: Yes, the challenge for the bond market is that inflation at the starting point is still relatively high and what is very different in this cycle is that the balance sheets of the private sector are in a very good form. So if the FED lowers interest rates, there are at the same time the balance in the private sector in a good form. So if the growth of the private sector is reflected, because the tax deficit will expand in 2026 due to the already announced tax reductions, there will be a strong question from the government side and if the private question also includes, that will be a concern for the bond market.
It will therefore be interesting to see what the response of the bond market is when the FED records its tariff reductions. Our point of view is that it comes in addition to the growth delay, ie growth of the private sector does not immediately apply and so we expect our global macro strategy team that will fall to 4% by the end of this year.
If the Fed finally lowers the rates, you will not see a flight of streams that go back to the US?
Chetan Ahya: In general, this happens if FED cuts in response to a recession type risk. We don’t see that in this cycle. We expect a delay in the growth of the US. We expect that it will delay up to 1% on an annual basis by the fourth quarter of this year of 2% that we saw in the print in the second quarter, but we do not expect a recession. Our position is that the dollar will fall even further for two reasons.
Number one is that there is the macro risk premium that attaches investors to the current macro situation in terms of policy uncertainty, a high tax deficit, increasing government debt to GDP and the second reason is the fact that the interest rates, since the Fed Rentet rates, reduces the interest and some of the rental shells in particular the deer shells of the DIACTRENTELLENTELLENTERSCHILLENT in particular the DIACTRENTELLENTELLENTELLENTERTERS DIGENTERFARTENTERTERTERTER’s shilling shells of the VS the Name Shalling Depverbarts. In the dollar. With regard to the streams, we do not expect it to weigh on the dollar. The dollar should not appreciate it and that is why you should not expect a lot of capital inflow to return to the US.
You follow India and China very closely. We have just had comments that arrive from China yesterday and say that if the US is not willing to accept India’s goods on the basis of the high rate, the Chinese markets are open to Indian goods. Help us to understand how this would form the macros for both countries in terms of their export and import figures.
Chetan Ayaya: Well, as far as trade is concerned, there is certainly much more room for India and China to have more trade. However, the challenge for India is a bit to export to China, because almost everything that India can export to the US is also able to export that to the rest of the world. So there is a need for a market in China for Indian products, something that China can import from India.
Conversely, ie India has to import products from China, is a huge, especially because we know that India is trying to get more in production. It needs a lot of capital equipment and some components that India wants to make as iPhones must come from China. The trade relationship of India-China is unbalanced and what we still have to see is proof of what the products are that India can export more to China.
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