Kotak Mahindra Bank Economist Indranil Pan In a Note

India is unlikely to benefit too much from the U.S. Federal Reserve's third round of quantitative easing, says Kotak Mahindra Bank economist Indranil Pan in a note. The additional liquidity will push commodity prices higher, particularly crude, a major negative for India's import bill and twin deficits. "Export growth is unlikely to be boosted significantly as we do not expect major economic benefits out of QE3," Pan says. Thus, there is every chance that the current account deficit will remain elevated while the fiscal correction tends to be a moving goal-post even after Thursday's hike in diesel price, he adds. In the near-term, enhanced global risk appetite could increase capital flows into India, thereby boosting the equities market and appreciating the INR. Still, "given continued risks of policy implementation on the European side and with the "Fiscal Cliff" in the U.S., sustained risk appetite is unlikely," Pan says. He expects the EUR/USD to ultimately correct and tips the USD/INR between 54.00-57.00 near-term.

Kotak Mahindra Bank Economist Indranil Pan In a Note

Find us on Google+