In an interview with CNBC-TV18, Jahangir Aziz, Head of Emerging Markets Economics, Research & Commodities, JPMorgan, shared that growth will recover, however, it will be a lot slower. Aziz pegged India’s GDP between 8-8.5 percent this year, however, he cautioned that crude prices do pose a risk and could hurt the growth forecast.
He said, “Oil price shot can change 8.5 percent down, I have no sense where the oil prices go, but that is a big risk at this point in time.”
Giving an insight into India’s rising dues, Aziz pointed out that regardless of any measures that are taken by the Indian government, the current account deficit will widen. He explained that the private sector having curtailed its spending could be why there’s a level shift down in India’s current account deficit. Additionally, he also mentioned that there will be some pressure on the rupee.
He said, “Regardless of what the government does, current account deficit will widen; there is no way in which you can stop that from happening. So the pressures on the rupee will mount, but that is not going to be that much if oil stays around USD 110-120 per barrel level.”
With the Russia-Ukraine war throwing caution to economies the world over, Aziz expects the sanctions that were imposed on Russia to impact commodities on a global scale. He cited that the sanctions imposed over the weekend changed the game as $640 billion worth of Russian reserves were brought down. He clarified that measures on SWIFT will have a big impact on the Russian economy too. Further, if tensions keep escalating between the two countries, then ensuing sanctions will rise and that could incite retaliatory actions from Russia as well.
“These sanctions will be severe on the Russian economy. We have already seen what happened to ruble, stock market, interest rate, but the reverberation across the world through commodity prices and through other manufactured exports will be significant,” Aziz said.
On the impending US Fed rate hike, he expects a hike of 25 bps until a neutral rate is reached. “Unless and until the Fed actually sees, not high inflation but high inflation denting growth and denting the labour market, I think the Fed is on track for a 25 bps rate hike in every meeting from now till they reach their neutral rate, which we believe is around 2.25 or 2-5 at this point in time,” he said.
For the entire interview, watch the accompanying video