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Fiscal deficit not a worry, focus on revenue deficit: Mowat

Mowat said things are improving on the macro front, but in absolute terms, the pace is still not satisfying

There can be sizeable job creation even without large capex spends, says Adrian Mowat of JP Morgan. He says the government needs to improve the business environment and that itself will encourage many companies to add to their workforce.

In an interview with CNBC-TV18, Mowat said things are improving on the macro front, but in absolute terms, the pace is still not satisfying.

On the Budget, Mowat feels the government should not be worried about a higher fiscal deficit, and should instead concentrate on narrowing revenue deficit.

“Let’s have a bigger fiscal deficit, but a lesser revenue deficit,” Mowat said, adding that the government should borrow more now that interest rates were cooling, and also because of weak crude prices.

“Borrow more, but spend wisely; invest in infrastructure,” Mowat said.

Contrary to the widely held view, Mowat says the global economy is in good shape, pointing to the strength in the US economy and the improvement in credit growth in Japan.

Back home, he sees the RBI continuing to reduce interest rates over the next 18-24 months.

Mowat says cyclicals and financials are the best bets to play a recovery in the economy and a downcycle in interest rates.

He says the global markets are expecting a USD 500 billion monetary stimulus by the European Central Bank.

But more than the cost of money, one needs to see if credit growth will happen because of the quantitative easing (QE) by the ECB.

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