Ewen Cameron Watt of BlackRock believes the outlook for India is good due to sustainable benefit from energy prices.
Speaking to CNBC-TV18’s Latha Venkatesh, Ewen Cameron Watt of BlackRock shared his views on Indian growth, liquidity situation and his outlook for crude prices.
Below his the transcript of his bytes played on CNBC-TV18
The investment case for India is a strong one at the moment. The combination of declining oil prices and food prices has allowed inflation to come down, along with action taken by the government to deal with more structural long-term risks of inflation in turn that is allowing RBI to start to finally lower rates. I think that is a very positive background, particularly with the slow but gradual improvement in the economy in India.
Interest rates in India
I think we believe that if the interest rates are going to come down, it has to be domestic consumption, it has to be parts in the financial system, and it has to be areas that are benefitting directly from actions taken in India than necessarily the world business cycle. There isn’t to say that there are many fine names in the IT sector, but I would say that if we feel the markets are going to be driven by rates and structural reforms in absolute terms, then you have got follow those.
Growth outlook for India
We believe that the outlook is good for India. We believe that the energy price benefit is going to be sustainable. Of course there are losers, if you are in oil exploration or services business, life is tough, but there are winners as well and the key to success for investment strategies is working out the balance between the winners and the losers
By comparison with the 1980’s when the prices fell 50% in real terms, which is what was seen last year, and 1998 when it fell 50% in real terms, and in 2008, the overcapacity that exists in the world oil industry is less than 4% of output, whereas in those previous periods it was 10-16%. So it should take a shorter period of time for capacity to be forced out and demand to rise and put the market back into equilibrium, that it did in the 80’s. I think by this stage next year we will be looking at oil prices in the mid USD 60 per barrel.