Date:17/10/2007 URL: http://www.thehindubusinessline.com/2007/10/17/stories/2007101750790600.htm

Back Lehman bullish on rupee, equity market

Our Bureau

New Delhi, Oct. 16 India’s equity market will outperform developed and emerging market indices over the next five years, and the Indian rupee will appreciate significantly against the US dollar.

This optimistic prognosis has been made by Lehman Brothers, a global investment bank, in its comprehensive report on the Indian economy titled “India: Everything to Play For” released on Tuesday.

The investment bank has also concluded that India’s economy could grow by 10 per cent or more annually over the coming decade.

“Today’s launch of the firm’s landmark Indian economic report reflects the intense interest that global investors have in the world’s emerging economies, especially India, and it marks yet another milestone in the expansion of Lehman Brothers in Asia”, Mr Tarun Jotwani, Chairman and CEO, Lehman Brothers, India, said.

The report concludes that India’s rapid economic growth bears all the hallmarks of the economic “take-off” that took place in other large Asian economies in previous decades, such as China and South Korea, including rapidly rising GDP per capita, a high ratio of investment to GDP and an increasingly open economy.

It has noted that the liberalisation of foreign trade and investment and rapid development of financial sector, pursued against backdrop of prudent macroeconomic management, are contributing to rising ratio of investment to GDP and further productivity growth.

Further financial sector reforms could contribute 1-1.5 percentage points to long-term GDP growth, and boost net capital inflows from about $ 38 billion to over $ 200 billion within ten years, the report added.

It, however, pointed out that labor market reforms to spur the necessary job creation over the next decade will be a key challenge.