India’s economy may be enjoying a “sugar high” from earlier stimulus that is set to eventually fade, according to JPMorgan Chase & Co.’s Jahangir Aziz, who warned that markets may be pricing in too many interest-rate increases.
The Reserve Bank will probably deliver an initial quarter-point increase this year, in part because policymakers have strongly signaled such a move, the co-head of the investment bank’s economic research department told Bloomberg Television’s Paul Allen on Friday. However, he’s less certain about what follows. Financial markets imply about 100 basis points of hikes this year.
“The economy is on a sugar high. You know what happens when the sugar high fades,” Aziz said. “If you start moving interest rate up, most likely there will be an impact on both investment as well as on consumption.”
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