Economic growth forecast in the range of 8% to 8.5%: Barclays Capital

What's the overall view on India, what's the stance that you are taking. There have been some upgrades coming in from key brokerages on the growth targets in the region? What are your growth projections and what would they be subject to for revision, what are the factors that you are watching out for? Well, India clearly on the domestic growth momentum has been very robust as reflected in industrial production figures and clearly that has also been filtering through into inflation numbers which we will get later today. I think going forward we see this broadening out of growth from largely the manufacturing also in the service sector going forward and our growth forecast is in the range of 8% to 8.5% and risks would be clearly on the upside. What perhaps are the headwinds at this juncture because we are looking at India being pretty much running its own cost and being one of the top runners in terms of an overall growth projection? What could peg us back? Well like in the current time probably one of the things which the RBI would be looking at quite closely as well is inflation. As I mentioned we get WPI numbers and we think it will probably be about 10.4% which would be the near term PE but clearly rising inflationary pressures and elevated inflation expectations do tend to erode disposable incomes so that is something definitely to worth keep an eye on and I think here the RBI is going to come through and tighten policy. We expect the RBI to hike the reverses as well as the repo rate by 50 basis points next week. What would that lead to in terms of an overall rate tightening projection for the year? We look for another about 125 basis points sort to come through for the year and I think there will also be some CRR tightening to rein in liquidity in the system. What would this mean for the entire banking system in India where there has been much talk about liquidity pretty much playing itself out and being a flush, how do you think these rate hikes would impact credit growth which hasn't really picked up as much as it was expected to over the last six to eight months? Credit growth is picking up gradually and going forward. If you look at the historical relationship of credit growth and industrial production in India, it normally lacks by two quarters. Given the strength that we have seen in the manufacturing and the industrial sector I think there is little doubt this credit growth is going to pick up going forward and clearly that fits in with a strong fundamental growth demand story in India as well.
RAVI NANDAN VERMA
PGDM-II