ECB has enough firepower to prevent contagion: Adrian Mowat

HONG KONG/NEW DELHI: Expressing concern over the policy structure in the Indian economy, Adrian Mowat, Chief Asian and Emerging Market Strategist, JP Morgan Chase told ET Now that this structure is unhelpful for medium to long term growth.

Stating that the tax policies of the government were discouraging investors, Mowat said that a clarification on the same was required to attract inflows. Even though Mowat sees inflationary pressures moderating, he said that the headline inflation needs to come down further for the economy to perform better. The Reserve Bank of India (RBI) may ease rates further in FY-13 as growth slows, he opined.

Indicating sharp slowdown in the economy, industrial production declined by 3.5 per cent in March mainly on account of contraction in manufacturing and mining output.

Growth in the factory output, as measured by the Index of Industrial Production (IIP), was higher at 9.4 per cent in March last year.

Asked about his outlook for the Indian rupee, Mowat said that the rupee is moving into a period of high volatility. Better trade data, he feels will help bring the rupee down to levels of 50. He also expressed optimism about the financial, engineering and construction companies in India.

Speaking on the global economy, Mowat was confident about the US economic growth. Mowat expects oil and commodity prices to cool down in 2012.

He also said that the Eurozone situation is better in 2012 as compared to 2011. Mowat doesn't expect Spain & Portugal to be the next major victims of the Eurozone crisis. He believes that the ECB has enough firepower to prevent a contagion.

Mowat however added that the global markets may still be fearful of the EU crisis and sell-off further if Greece-Eurozone issues deteriorate. A lack of coalition government in Greece is weighing on the markets, he said.

Greek political party leaders emerged late on Sunday from emergency cabinet talks with no breakthrough in sight, raising the prospect of new elections that could scupper reforms and force the country out of the eurozone.