Economy will kickstart in 3rd quarter

Economy will kickstart in 3rd quarter
The Financial Express, June 24, 2009, Page 2

fe Bureau, Mumbai

Key decision makers and influencers gathered at the fourth Emerging Markets Forum and expressed their views on the Indian economy, while most seemed bullish; there were also some voices of concern.

On the positive side, HDFC Bank chairman Deepak Parekh, reckoned that the Indian banking system was flush with funds and the commercial banks were parking these with the Reserve Bank of India (RBI). “The demand for credit is not rising in line with the liquidity, As a result, I think the lending rates are likely to go down further. I expect the rates to go down by at least 50 basis points over next six months,” said Parekh

Speaking about the housing sector Parekh mentioned that the demand for affordable housing (up to Rs 30 lakh per unit) is on constant rise in the country as property prices have corrected lot in this segment in recent past. “HDFC's loan disbursements in this segments is improving on month-over-month basis in current year,” said an optimistic Parekh.

Planning Commission deputy chairman Montek Singh Ahluwalia also mentioned that the economy would surely kickstart in the third quarter of the calendar year. Ahluwalia was promptly surrounded by the a host of eager participants from over the globe and India as well.

However, Rajya Sabha member and former RBI governor Bimal Jalan, who would also be one of the panel member in the four days of discussion (three in Mumbai and on in New Delhi), mentioned that he was concerned about the spread between the actual lending rates and the repo rate. “This is some the RBI will have to look at closely,” he told FE reporters.

The current repo rate is around 5.5% and the banks are lending at 11% rates. “A huge gap of around 600 basis points,” he asserted. “I am really curious about the manner in which the government intends to plug the fiscal deficit in the current circumstances and manage to wriggle out of what could be a potentially serious predicament,” said a banker.

Speaking about the event, Pratip Kar, a senior official with the World Bank and former Sebi executive director, said, “Foreigners in this forum would get to know about the seriousness and the direction of government reforms in the days to come. That would attract a lot of foreign funds in the country.”

“The debate and discussions related to political and governance problems in India along with exchange of ideas with regards to the possible institutional solutions, is a welcome move” added Zia Mody, senior partner with leading law firm AZB & Patrners.