Anti-inflationary measures are unlikely to turn India into a slow growing economy, while other Asian nations could face the situation of rising prices and economic stagnation, a latest report says. "We do not believe that India would be affected significantly in a stagflation scenario and growth would remain strong in relative terms...," global research firm Lehman Brothers said in a recent research report.
However, even as the economic growth is projected to remain strong, interest-rate sensitive stocks could be adversely impacted during stagflation situation in Asia.
Stagflation refers to a situation when inflation is rising and the economic growth is simultaneously slowing down.
The negative impact is likely be felt by interest rate-sensitive stocks or by companies that are not in a position to pass on cost pressures to consumers, Lehman said.
Further, investment spending is unlikely to witness a substantial slowdown primarily on account of significant shortages in key sectors such as steel and power.
The report pointed out that risks out of a stagflation scenario would be high for the banking sector, infrastructure, automobile and cement firms.
"The risks are significant for part of the banking sector, companies with a high proportion of fixed-price contracts and companies with high energy usage without the ability to pass on increased costs," the report said.