David Cohen sees 8% eco growth despite high oil, RBI action

David L Cohen, Director, Action Economics, expects the Reserve Bank of India, or RBI, to hike rates further as inflation will continue to rise. “Surging oil prices were the main driver of this accelerated inflation. I see another 50 bps repo rate and CRR hike by RBI. However, the economy will continue to grow at 8% despite these stringent measures and high oil prices.”

Excerpts from CNBC-TV18's exclusive interview with David Cohen:

Q: Are you expecting more by way of rate action from RBI? If so, how much?

A: Inflation is likely to rise higher. Last week, the Wholesale Price Index saw the highest YoY increase in 13 years. So, RBI will feel the need to contain inflationary expectations.

Q: How much more tightening are you expecting in terms of a CRR or repo rate hike? What is your outlook on the Indian growth story at this point? In 2008 and 2009, what kind of growth trends are you expecting?

A: Another 50 bps rate hike can be expected. Further rate hikes will depend on how fast inflation accelerates. It also depends on oil prices going forward, as this has been the key driver of accelerated inflation. Higher oil prices as well as tightening by the central bank are likely to drag growth. But India should still see around 8% growth. This is moderate as compared to last year, but that is still quite healthy.