As the fundamentals in India are better in terms of economic growth, the country will probably outperform China, says Geoffrey Dennis, an Independent EM Commentator.

Dennis believes that the fundamentals in India are certainly better in terms of economic growth.

“If I were to put money on the table on a one-two year view, I would still – at the margin – prefer India because the fundamentals are better there despite the valuations,” he said.

According to him, China needs a fiscal push and one needs to see the details of this fiscal push.

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“Because we have seen monetary easing of a whole variety of instruments over several months without having real impact on the economy,” he said.

The key in China is the weakness of consumer spending, the low level of consumer confidence and the government’s inability to switch the sources of growth from investments and exports towards consumer spending.

He believes that – to get this going China has to get the property sector back on its feet and needs to see that the consumer is doing well through improved confidence and spending.

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The US Federal Reserve announced a 50 basis point (bps) rate cut on September 18. Dennis expects two more rate cuts for the rest of the year and a 100 bps rate cut next year.

Given how reasonably solid the US economic data is, the Fed is easing, it is heading towards 2% inflation, equities generally globally are looking good.

“But I am still a little nervous about whether we are going to see Chinese growth breakout of this fall to 5% growth range, which is what you need. But for that you need a stronger consumer and I am not convinced here that yet we are going to get that,” he said.

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