‘Euro moving towards recession; slowdown in BRIC nations’

Das also believes that the core of eurozone is heading towards a double-dip recession. The emerging markets too are slowing down, particularly the BRICs nations, he opined. Das is also optimistic about seeing 7% growth in India if policy actions pick up. India has a lot of issues to grapple with and inadequate structural reforms are affecting the country's growth, he explained.

Here is the edited transcript of the interview on CNBC-TV18.

Q: Let's start with the place where the epicentre for global action today is, Europe. What are your expectations from Mario Draghi given the constraints of German opposition?

A: I think he has already been somewhat constrained in the rhetoric by German opposition. The German opposition itself is somewhat mixed. There is more resistance in the Bundesbank and in a sense in the ECB Governing Council than there is on the political side of Germany at this point.

There is a kind of a good cop, bad cop thing going on. What we think will happen later this week is that Mario Draghi will put some flesh and quite a bit of good specifics around the bone that he threw the markets at the end of July and the beginning of August, when he himself specifically layout how they will do the bond purchases, probably concentrated in the short end as has already been signalled together with conditionality.

Probably various kinds of financial conditions as well so as to avoid unintended consequences, more hazard for the sovereigns that are going to participate Spain and Italy, more hazard for creditors and try to really target the issue of convertibility risk and the reversibility of the euro. We think that will help, but it won’t really solve the problem. It will mitigate the scale of the problem.

Q: Are you expecting anything by way of quantitative easing in 2012 itself, if not in September by Fed?

A: Yes, we are. We have long thought that the recovery was going to be anaemic and proved to be too anaemic and that the Fed would have to respond in order to be mandate consistent. Unemployment is too high, the duration of unemployment is very long and of course, there is a looming fiscal cliff.

We don't think the US will fully cut the budget deficit as much as all elements and the expiration of various kinds of tax cuts would suggest. But there is still going to be some significant fiscal adjustment which is going to hammer growth in the United States and the rest of the world starting in 2013.

Q: We have seen quite a bit of a rebound in gold. In Indian rupees it is sitting at a record high and quite a few commodities have actually done well. Is it all to do with the expected monetary loosening from the US and perhaps even from the ECB hopefully today and is the run in the likes of gold likely to continue?

A: I would say our view of it is that various different kinds of things are driving the run up in risky assets as well as in gold and other commodity prices. Risky assets' run up is more internally consistent than the run up in gold. The run up in gold is kind of a disaster trade, either a high inflation or a deflation kind of fear and this of course reflects a high inflation fear because yet another central bank is going to monetize potentially a significant amount of private or public debt in the case of the ECB.

Of course at Jackson Hole, Bernanke left the door wide open to QE3. So the gold rally at this point perhaps reflects a fear of inflation and commodities and risky assets are rising because we are heading off the fear of cascading defaults of collapse in the eurozone and the deflation that would result from that would be very bad for risky assets.

In some sense there is some logic, some method to this madness in the market. What we would say however is that these monetary actions will mitigate the pain, they won't make it go away. Fiscal deleveraging, private sector deleveraging, household deleveraging or the household cutbacks at least in eurozone will continue.

The periphery of the eurozone, depending on the countries either already in a deep recession or even in a depression and the core of the eurozone is heading into a double dip. United Kingdom where we are now is already in a double dip and a stagnation because of fiscal retrenchment and double dip looms over the United States because of the coming double dip.

We are not very bullish about risky assets, we are more bullish about gold. We think that the conditions for periodic bouts of risk aversion are still there because disaster will continue to loom over the eurozone and double dip will continue to loom over the rest of the world. Emerging markets are still slowing down. India, China, Brazil and pretty much everywhere there is a slowdown in the emerging market economy.

Even the smaller ones are slowing down relative to expectations and with limited room to really ease up significantly and stop growth, we will see more monetary easing and that will help. But it won't lead to runaway inflation anytime soon. Balance sheets are still weighed down with too much debt. There are still structural issues in developed and emerging market countries. The world is going to be growing more slowly than inflating very rapidly or deflating. So we are not gold bugs.