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Economy may cool off to 6-7% by mid-2009: Jim Walker

Published on Fri, Aug 29, 2008 at 10:53 | Source : CNBC-TV18

Updated at Wed, Dec 03, 2008 at 18:22

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Jim Walker , MD, Asianomics , feels that the macros may be back on track but he see one more repo, CRR hike. He feels that the credit growth has still not eased off.

Walker expects economic activity to cool off to 6-7% by mid-2009. He sees some slowdown post October. But Q1 GDP numbers will be fine, he said.

Excerpts from CNBC-TV18's exclusive interview with Jim Walker:

Q: What state do you see Indian macros in, have they improved marginally or are they still shaky?

A: The main thing is that Reserve Bank of India (RBI) is back on track in terms of controlling inflation, interest rates, cash reserves ratio that has gone up. We can be pretty confident now that everything is being done to make sure that inflation doesn't get any worse.

So, in that sense the macro is back on track. It is going to take a toll in terms of economic activity especially over the next 12 months or so. I am hoping that we may only have one more interest rate rise, Cash Reserve Ratio (CRR) rise as well.

Q: Do you think a rate hike is possible in October once again?

A: It's possible and it just depends on what happens with inflation in the next few months and it is inflation in monetary numbers. It will also depend on whether credit growth is starting to ease off and M2 is beginning to slow down, so far that hasn't happened yet. There is a possibility of another rate rise.

Q: What about growth, our GDP numbers will come out today? Do you think all of this will take a bigger toll on economic growth than the market believes?

A: Q2 numbers will not be that badly affected. I would be looking for a good figure for the year. By this time next year, economic activity will have cooled fairly in the range of 6-7% on a YoY basis by the middle of 2009. So it will have an impact but Q2 numbers will be okay, probably even Q3 numbers but after some significant slowing.

Q: Do you think global macro conditions are supportive of the ending of equity bear markets that we have seen across markets or do you think it's premature to say that?

A: It's premature and the global position is very fragile. Equity markets are reacting to certain things. Credit markets on the other hand have again been falling just as that was the case in 2007 and early 2008. The credit markets are telling us the way equity markets will eventually go and I am afraid that is down significantly further.