Can India grow as fast as China?

This report is from this week’s CNBC “Inside India” newsletter which brings you the right news, insights and market commentary on emerging powerhouses and the big businesses behind their meteoric rise. As you see? You can subscribe here.

Wall Street’s big banks have been quick to tweak what they expect from India’s growth this year.

Bank of America, Goldman Sachs and Deutsche Bank have all entertained the idea that India’s economic expansion could be slower than previously expected. The country’s GDP figure fell to a 15-month low of 6.7% year-on-year in the second calendar quarter.

However, India’s central bank appeared to shrug off the negativity earlier this month and expressed a bullish view on India’s growth rate, still expecting the economy to grow by 7.2%.

When asked by CNBC’s Tanvir Gill if there was any downside risk to this forecast, the Reserve Bank of India governor replied emphatically “no.” “Not at all.”

“We are quite confident about the 7.2% growth which we have projected in our current assessment,” Shaktikanta Das said in an exclusive interview for CNBC.

“The underlying momentum is very strong and is not driven by some seasonal factor or single factor. The growth momentum in India is very strong and is mainly due to structural factors.”

Das pointed to data showing that consumer spending, which makes up about 60% of GDP, rose to 7.4% in the second calendar quarter, compared to 4% in the previous quarter. In addition, construction continued to grow at 10.5% for the same period. The agriculture sector, which grew by 2.2%, was held back by the delayed monsoon but is beginning to recover.

“The only component” that is down, according to the governor, is government spending in the middle of the election season. “Furthermore, I expect that the budget that has been budgeted will be implemented by the central and state governments, and then it will be sufficient,” he said.

Not only does Das remain bullish on India’s short-term growth prospects, he is also bullish on the medium-term trajectory, expecting GDP to grow by more than 7.5% annually.

“It could be between 7.5% and 8%, I would say,” added Das. “But on a conservative basis: seven and a half.”

However, when asked whether India’s growth rate can compete with what China has achieved over two decades, the governor was tight-lipped.

The growth rate is politically important for Prime Minister Narendra Modi as he has set a vision to make India a developed economy by 2047 – just 23 years from when India will enter a century of independence.

Meanwhile, China, now an upper-middle-income country, has grown by more than 10% annually for more than 22 years since the 1960s, according to CNBC World Bank data. India was never able to achieve that feat.

“I think that growth of 7.5% to 8% will not cause sustainability concerns. I think it can be sustainable. But if you see 10-plus growth, before I try, I have to do more homework. “said Governor Das.

One important element behind the central bank’s short-term view is that investors and businesses are pouring money into India to ride the growth story or diversify away from China.

This may change as China implements measures to re-compete for investment into emerging markets. This week, China’s central bank, President Xi Jinping and other top leaders announced plans to boost the country’s economy and attract investment.

Just hours after the announcement, billionaire hedge fund manager David Tepper of Appaloosa Management told CNBC that he had taken an unlimited bet on China without a hedge, just buying “everything”.

Additionally, investment bank strategists Barclays have been bullish on China in the near term.

“Renewed stimulus expectations + rally of global laggards + marginal improvement in sentiment amid low positions is setting China stocks up for possible second major breakout this year,” strategist Kaanhari Singh said in a note to clients.

“We will choose Chinese stocks over Indian equities until October.”

If India wants to grow as fast as China, it may have to move forward.

India has refused to join the world’s biggest trade deal. “India will not join RCEP because it does not reflect the guiding principles on which ASEAN started, nor is it in the country’s interest to enter into a free trade agreement with China,” India’s Commerce and Industry Minister Piyush Goyal told CNBC. Tanvir Gill in an interview this week. The Regional Comprehensive Economic Partnership, or RCEP, was signed in 2020 by 15 Asia-Pacific countries that account for 30% of global GDP. Watch the full interview with Goyal here.

Indian physics startup Wallah reaches $2.8 billion valuation. The venture capital firm, led by Hornbill Capital and involving Lightspeed Venture Partners, GSV and WestBridge, invested $210 million into the education technology startup on Friday. This makes it worth $2.8 billion, surpassing the last price of $1.1 billion. Wallah Physics offers free and paid courses – which cost less than $50 on average – for exams in India.

Help become a semiconductor powerhouse. Indian Prime Minister Narendra Modi wants the country’s electronics sector to grow from $155 billion today to $500 billion by 2030 – and the semiconductor industry will be a major factor. Industry experts are divided on whether these goals are realistic. But they were unanimous in saying that India needs external help to kickstart this effort.

New reality for Indian banks. Former head of State Bank of India Arundhati Bhattacharya told CNBC-TV18 that India’s era of deposit-led banking is over. With the growing prosperity of the country, India’s younger demographic of investors are deploying their cash into low-risk assets instead of keeping money in banks. “Our treasury really needs to tune up to know how to balance assets and liabilities,” said Bhattacharya.

Dimon said India is poised to take advantage of US-China tensions. JPMorgan Chase CEO Jamie Dimon warned that the “China +1” transition will take years as the company navigates the complexities of relocating operations. “It’s already started, it’s going to take years – you’re talking about 5, 10, 15 years. So even if it’s going to happen, it’s going to take a long time,” he told CNBC-TV18.

Don’t make mistakes when investing in India (customer content). Amit Dixit, head of Blackstone Private Equity in Asia, warned investors that focusing on India’s booming economy and stock market could blind them to potential pitfalls. “You have to have a certain micro,” Dixit said.

The Indian stock market collapsed. At Good 50 it is now higher than 26,000 points to reach another record high. The index is up 1.6% for the week but is up 20.64% so far this year.

The benchmark 10-year Indian government bond yield fell this week to 6.71%, from 6.75% last week.

On CNBC TV this week, Sajjid Chinoy, India’s chief economist at JPMorgan, told CNBC India that “the current account deficit has behaved very well and very well.” The Bank expects India’s deficit this year to be around 1.2% of GDP, which is very sustainable. Furthermore, India’s foreign exchange reserves allow the country to have monetary policy independence.

Raamdeo Agrawal, chairman and co-founder of Motilal Oswal Financial Services, weighs in on the country’s investment landscape. He said India’s bull run is in “full swing” but will get “bigger,” predicting the Nifty 50 will reach 50,000 points by 2030.

Manba Finance, a non-banking finance company that issues loans, was registered on Monday. Joining the Indian stock market on Thursday was KRN Heat Exchanger and Refrigeration, a maker of heating and cooling components.

September 27: US personal consumption expenditure index reading

September 30: Manba Finance IPO

October 3: KRN Heat Exchanger and Refrigerator IPO

October 4: US nonfarm payrolls for September, India Composite PMI