(Bloomberg) -- The controversy surrounding Adani Group will not lead to a systemic risk for the nation's banking sector or impact fund raising ability of other Indian firms tapping the markets, said Santanu Sengupta, chief India economist at Goldman Sachs Inc.
“India's banking system is in a much better position compared to last decade and that is the main lever for funding investment cycle,” Sengupta said in an interview to Bloomberg Television's Rishaad Salamat and Haslinda Amin Friday. “Other entities should not find it difficult to raise debt or borrow from the banking system as capital positions are the best in the last 15-20 years.”
Indian manufacturing firms have also shed their leverage and are ready to take on more loans as capacity utilization climbs, Sengupta said, adding that government spending on capital expenditure will bolster infrastructure in Asia's third largest economy.
Adani's $108 Billion Crisis Shakes Investors' Faith in India
“There are considerations of monetary policy cycle tightening etc., which might come into play, but the investment cycle is based on more fundamental macro factors than one particular group,” Sengupta said.
He also expects the central bank to raise rates by a quarter-point in its monetary review on Feb. 8 as core inflation, which strips out volatile food and fuel prices, remains sticky.
Goldman Sachs and Nomura Holdings Inc. had earlier predicted that the RBI will have to start lowering interest rates later in the year as India's growth may slow due to higher borrowing cost.
--With assistance from .
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