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See India's GDP growth at 5-6% next year: Jim Walker

Published on Fri, Oct 31, 2008 at 11:36 | Source : CNBC-TV18

Updated at Mon, Nov 03, 2008 at 14:48

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Jim Walker, Managing Director, Asianomics, said India's gross domestic product (GDP) growth is seen at 5-6% next year. China's GDP growth, he added would be lesser than that of India at 4-5%. Japan's would be a drag, Walker said, while overall, Asia would see a 2-3% growth.

The US GDP de-growth may turn out to be much more significant [than what is now projected], Walker said.

Here is a verbatim transcript of Jim Walker's interview on CNBC-TV18. Also watch the accompanying video.

Q: Do you think this globally-concerted central banks' action that you are seeing will lead to a durable rally across the world in equities or [will it be] just a bit of short-term pop?

A: I expect it is going to be more of a short-term pop. Certainly, the central banks are busy and even the Bank of Japan is cutting interest rates but the truth is, at the moment, interest rate cuts really don't mean much difference to economies. All they do is they help the banking systems slightly in terms of profitability.

People aren't going to be borrowing in this kind of environment and most western banks are not going to be lending anyway regardless of how low the interest rates are. They need to cut their leverage and cut the risk.

Q: The US has reported a negative GDP number. It's the first of how many quarters of negative GDP according to you?

A: I think this will probably be at least first of at least six in a row, which would be pretty close to unprecedented. I am afraid some of the previous numbers are probably going to be revised as well and certainly the 0.3% negative number today, after a revision in a month's time, will probably become a much more significant negative number.

When you look at the details of that report, the two things holding GDP up were government expenditure and inventory building and that is naturally a negative sign rather than a positive sign. You don't want inventories to be building at this point in the cycle. What it is really telling is that people have got more and more unwanted goods on the shelf, so I am afraid there is more negative news to come and more downward revisions probably in these numbers.

Q: Six quarters, is that your best-case scenario right now or worst-case?

A: It is really best-case. The credit contraction that is going on in the global economy is something that we haven't seen since the 1930s. So usually you would expect a recession to long for about three negative quarters and then [see] a bounce and then another negative one within a couple of quarters after that. Given the unprecedented nature of this negative contraction, six negative quarters is not unlikely.

Q: The problem also is that many of these concerns are hitting home in Asia; some countries in Asia as well are getting to that recessionary stage. How worried are you about growth contracting within the Asian region and how much do you think policymakers will react to that?

A: Next year, we are only looking at 2-3% points of average growth in Asia and that includes China and India, as well as Japan. Japan will be a drag. Next year I think, it's going to be negative numbers from Japan. The more trade-open economies in the region will also be below zero. So I think countries like Singapore, Malaysia, and Taiwan will certainly drop below zero in terms of GDP growth. For India, we are factoring in about 5-6%, China [will see] about 4-5%. Even potentially below that, maybe for China and rest of the region [we will see growth at] around 2-3%-mark. So it's a pretty weak outlook for 2009.