Why India will remain a top candidate for emerging market flows: Manulife's Rana Gupta explains

India's economy is growing even as the fiscal deficit is contracting. This situaton is a perfect combination for investors, and that's why India is a strong candidate among emerging markets for foreign fund inflows, according to Rana Gupta, Senior Portfolio Manager and India Equity Specialist at Manulife Investment Management.

“In the last three to four years, India's central fiscal deficit has come down from 9% to a now projected 5.1% (in financial year 2025). That's a four percentage point fiscal contraction. But the economy is still growing at 6.5-7% real and probably 10-11% nominal. That's a pretty incredible thing, right?" Gupta noted in a conversation with CNBC-TV18.

In her Budget 2024 speech on February 1, Finance Minister Nirmala Sitharaman reiterated the government's commitment to stick to its fiscal consolidation path, targeting fiscal deficit of 5.1% of the gross domestic product (GDP) target for FY25. The aim is to achieve deficit of 4.5% by FY26.

| Budget 2024: Govt lowers fiscal deficit to 5.1% of GDP for FY25

Gupta also shared his expectations on the US Federal Reserve's policy actions in the coming months. Gupta anticipates June-July to be the start of a rate cut cycle.

Also Read | Fitch puts India's fiscal deficit at 5.4% for FY25 — beyond govt's target of 5.1%

He noted that the market is currently only seeking an assurance on rate cuts, and "it is more important that Fed is now on the watch and they are prepared to cut rates if the economy were to slow.”

In its latest policy announcement on January 31, the Jerome Powell-chaired Federal Open Market Committee (FOMC) left interest rates unchanged, within the 5.25% to 5.5% range, for the fourth consecutive time.

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