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Indian economy to enter 'Goldilocks' phase soon: Morgan Stanley

Indian economy to enter 'Goldilocks' phase soon: Morgan Stanley

Goldilocks economy -- not too much deflation, not too much inflation -- sustains moderate economic growth. In other words, that is the economy is in equilibrium: with economic stability, good employment figures and higher than global average growth

Asian economies - including India, China, Singapore and Indonesia - are set to brush aside the COVID-19 pandemic's impact and would enter the 'Goldilocks' phase in 2021, as per a Morgan Stanley research.

Morgan Stanley report shows that "The macroeconomic impact on AxJ (Asia except for Japan) from COVID-19 resurgence in different parts of the world has been manageable so far. We remain bullish and expect AxJ to transition from below-trend growth this year to a new 'Goldilocks' phase in 2021," the report said.

Goldilocks economy -- not too much deflation, not too much inflation -- sustains moderate economic growth. In other words, that is the economy is in equilibrium: with economic stability, good employment figures and higher than global average growth.

The report by Morgan Stanley economists - Deyi Tan, Zac Su, Jin Choi and Jonathan Cheung - suggests that economies, including India, have seen some action from the government which is set to impact the economy.

In economies where the COVID-19 situation is under control or improving, policymakers are fine-tuning measures, the report added. China has again tightened its border controls amid the recent rise in COVID-19 cases globally.

The report added, "India issued new guidelines to manage risks from recent festivity, onset of winter and lax adherence. Elsewhere, social distancing measures have been tightened in Korea (with a shift to a five-level social distancing system) and in Hong Kong. In Indonesia, the transitional large-scale social distancing measures in Jakarta were extended for another two weeks until December 6."

Capital expenditure or Capex has seen some momentum within Asian economies. The report added, "Capex momentum in AxJ so far has been mostly driven by policy support in China (infrastructure, as seen in rebar shipments) and tech-related investment in Taiwan and Korea. Elsewhere in AxJ, Capex indicators such as cement, capital goods imports and private investment index showed less bad declines. As consumption recovery broadens out and capacity utilisation rises, CAPEX recovery would likely follow suit."

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