Expect a rate hike, not rate cut, in 2015: Jahangir Aziz, JPMorgan

In a chat with ET Now, Jahangir Aziz, Head-Emerging Asia Economics, JPMorgan, talks about the RBI policy. Excerpts:

ET Now: There has been no change in the policy, but Rajan is stating that there is an upside risk to the 2016 CPI target. Your reactions?

Jahangir Aziz: You really do not have to read the policy very carefully even to come up with that statement. Imagine an economy which is as supply-constrained as ours. If this economy is going to move from a 5%-5.5% growth rate to a 6%-6.5% growth rate, necessarily it has to put pressures on resources. Therefore, you will see the core inflation moving up.

Necessarily there will be a stress on import. Much of the investment upturn will be imported, which means that the current account deficit will widen. We always thought there was going to be an upside to 6%, which is why we will have a rate hike. His language, more or less, gives us greater certainty that a rate hike rather than a rate cut is probably what we should be looking forward in 2015.