Willem Buiter of Citigroup believes India is back on the reforms path, he adds: "India did better in 2014 than 2013 and I expect that this momentum will be maintained. We've got very sound monetary and exchange rate management. We've got better fiscal management than we had."
India's GDP can grow in the 6 percent range next year, says Citigroup's global chief economist Willem Buiter, formerly member of the monetary policy committee of the UK and a highly acclaimed economist and central banker.
Claiming that the country is back on the reforms path, he adds: "India did better in 2014 than 2013 and I expect that this momentum will be maintained. We've got very sound monetary and exchange rate management. We've got better fiscal management than we had."
But the clamour for lowering interest rates is rising by the day. Buitler says it is always the case with political authorities – they want to eat the cookies before they have been baked properly. He feels Reserve Bank governor Raghuram Rajan must make sure that not just headline inflation, but the underlying inflation and trend inflation remains under control before taking a decision on rates.
Going ahead, there is also a possibility of currencies of emerging markets weakening, including the rupee, along with external inflationary pressures which at the moment are masked by weakness in commodity prices, especially oil, says Citigroup. "But as and when US exits from its zero rate policy, there will be downward pressure on the rupee as well," Buitler told CNBC-TV18. He believes the central bank will always be cautious with inflation targeting.
Moving on to the global scenario, he believes that the US Federal Reserve will not raise rates until the second half of 2015. He expects the Fed to wait till inflation hits target range.
But a bigger global concern is the Russian market. Decline in crude oil prices and the 50-60 percent rouble depreciation led to the country's financial problems, says Buiter. "Russian corporates including Russian banks that have borrowed from abroad in dollars and other hard currencies are going to be in deep trouble and it may well be insolvency in default...but not at a softer level," he adds.
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