Positive on India growth; Fed may hike in Sep: Glassman

The subtle message coming out of the US Federal Reserve seems to be that they are going to start the process of raising rates by September, says James Glassman, Senior Economist, JPMorgan Chase Bank. Although the Fed is keenly watching for some more evidence on the jobs market, the layoffs in the US have been at all time lows, says Glassman in an interview to CNBC-TV18."It is not so much about the date anymore; it is more of a concept of slowly moving policy back, something more normal," he adds.According to him the Fed hiking rates will not be a challenge to emerging markets provided the US Federal Reserve is able to manage in an orderly way its needed policy adjustment. He is optimistic of growth in both India and China going forward.Below is the transcript of James Glassman's interview with Ekta Batra and Nigel D'Souza on CNBC-TV18. Ekta: What is your reading of the Federal Open Market Committee (FOMC) outcome was and can we expect something conclusive come September? A: There is certain subtle message because employment trends have been steady. What they said today, there is no commitment, but what they said was they would like some more evidence on the job market, but the job market has been pretty steady. So the subtle message coming from the Fed is that unless something goes away, there is a pretty good chance that they are going to start this process in September. In fact looking at the labour market news that we have seen in the US with layoffs at all time lows that I know. It tells you that the Federal Reserve probably is prepared to start this process especially with policy rate at zero and they want to do this in a very orderly gradual way. It is not so much about the date anymore; it is more of a concept of slowly moving policy back, something more normal. There has been a lot of confusion about what is going on in the US because some of the numbers have been weak; some of them have been decent but what we are hearing is open minded but what we are hearing is a subtle message that don't be surprised, this process starts in September. Market not there quite yet. The market is priced for maybe 40-50 percent chance but as we get, we get two more rounds of economic data that will play into the Fed decision. This week and next week job report another month from now. So I think the time we see these next two rounds of data, we will be ready for this. Nigel: That point is well taken that you have maintained in the past that in fact you are looking at a September rate hike as well but for our own markets, you have also maintained that in fact emerging markets will not be affected and in India it is always coming on top in terms of the pecking order, are you sticking to that view? A: I think the way to think about this is what all these Central Banks are doing is that they are doing actions that are reflective of what is going on in their economy, and it is healthy, if the US economy, if the US Federal Reserve is able to manage in an orderly way its needed policy adjustment, that should not be a big challenge for emerging markets and a lot of this crisis of technique is already reflected in the market. The market has got a fairly cautious view about how the Fed is going to do this but if everything works as orderly as the Fed says they want it to be, I don’t think this is going to be a huge challenge for emerging markets and frankly, what is going on in these economies is more importantly what the Central Banks are doing. The reason Central Banks are reacting is because these economies are doing better. So the developed economies slowly speeding up again, we are quite optimistic about India including China, growth area is going to be quite good for the year and I don’t think what Central Banks have in mind is going to be disruptive, that isn’t the goal, the goal is to slowly withdraw stimulus that is no longer needed. That shouldn’t be that much of a disruption for any of us.