Researach Analyst firm Lehman Brothers, on Monday, gave a positive rating to India and said the country was firm on its growth trajectory, though in the short term it will suffer a hiccup due to inflationary trends fuelled by high interest rates rather than the subprime crisis.
Rating India higher than China, which is going through unprecedented inflation, Lehman Brothers said the subprime crisis would continue to linger in the western world, especially the US, UK and rest of Europe all through 2008 and even in 2009.
Briefing reporters here, Lehman Brothers Managing Director & Global Chief Economist Paul Sheard said the lingering problem would, however, not lead to recession in these countries.
High growth rate
Stating that India was to a large extent insulated from the subprime crisis in view of its diversified exports and greater domestic market, he said the country would continue to see high growth rates.
Executive Director & Chief Asia Equity Strategist Paul Schulte said the Indian corporate sector was on a sound note with the top 500 companies sitting on a cash surplus of around $40 billion. The country headed the Asian region, which had a total corporate liquidity of $450 billion, he added.
On sound note
Lehman Brothers India Managing Director and Equity Reserach Head Prabhat Awasthi said the problem faced by the indian industry was more due to high interest rates, than the subprime crisis and expected a further cut in the interest rates before the end of the current year. He said the country’s economy was on a sound note as the Indian banks would not be affected by fluctuations in the foreign currency as their exposure to foreign currency assets was very low at 1.8 per cent in 2007. A large portion of foreign currency assets is related to Indian corporates, he added.
He said the soft patch of India was mainly due to tightening of measures by the RBI since 2006. These mesures included hike in CRR to 7.5 per cent from five per cent in november, increase in repo rate and restrictions in capital flow.
