1) No trade-off between growth and inflation in the long term – Imperative to get inflation and inflation expectations down, to achieve higher growth and investments.

2) Growth is important, but composition of growth is even more important – healthy mix of consumption and investment growth needs to be achieved to prevent macro imbalances from building up

3) Need to maintain positive real interest (1.5-2.0%) in the economy – to incentivize higher financial savings, which is critical to fund investment needs of the country; unless this is achieved, pressure on current account deficit will persist

4) Inflation glide path – RBI has targeted to bring CPI inflation down to 6% by Jan 2016 and to 4% thereafter; need to sustain CPI inflation at 4-6% in the medium term 5) Current account deficit – Policy framework should be geared to sustain current account deficit at about 2.0-2.5% of GDP

Eoin Treacy's view

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India is an example of a country where people have voted for improving governance because they understand it is the only way the country will be able to capitalise on its demographic dividend. Developing a manufacturing base capable of employing millions of new urban workers will require major initiatives in terms of regulation, liberalisation, infrastructure development and policy stability. There is every reason to believe India is moving in the right direction to achieve these objectives. 

The Rupee is a key barometer of faith in the ability of the administration to deliver the stability and reforms necessary to achieve India’s development objectives. Following the swift devaluation in 2013 the Rupee has been among the steadiest currencies in the region. It has will need to hold the INR65 area if international investors are to remain sanguine about the market’s potential. 

The Nifty Index has bounced from the region of the 200-day MA and a sustained move below 8000 would be required to question medium-term scope for additional higher to lateral ranging. 

Indian 10-year government bond yields encountered resistance in the region of the 200-day MA last week and a sustained move above 8% would be required to question current scope for additional compression.