India's Economy on 'Sugar High' Warns JPMorgan's Aziz

Jahangir Aziz, co-head of economic research at JPMorgan Chase & Co., warns that India's economy may be experiencing a 'sugar high' from earlier stimulus packages. He believes that markets are pricing in too many interest-rate increases.

The Reserve Bank is expected to deliver an initial quarter-point increase this year, but Aziz is uncertain about future hikes. Financial markets imply around 100 basis points of hikes this year.

Aziz notes that India's solid economic expansion needs to be viewed against substantial policy support in the second half of last year, which included cuts to borrowing costs and the goods-and-services tax as well as regulatory easing.

He adds that another round of GST cuts appears unlikely, while rapid credit expansion could increasingly concern regulators. This leaves the RBI facing a difficult judgment over how much tightening the economy can absorb.