Below is a verbatim transcript of their interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video.
Q: How worried are you at Nomura about inflation? Would you think that it will be a bigger battle than we thought in the early part of 2011, what maybe RBI reactions?
A: Yes, it is going to be a very big challenge. This is a theme that we think is going to play out not just in India, but across Asia because our central scenario is that emerging markets continue to drive a lot of economic growth, which would mean a lot of capital inflows coming into these markets. Ofcourse countries do not want sudden fx appreciation which means more intervention. Therefore, policies remain more loose than they should be otherwise.
What is happening also in Asia is that food is a big portion of CPI basket across Asia and I think food inflation and this is ofcourse India we have been discussing how food inflation is becoming structural. But I think across the world now, the demand/supply gap is such that food prices do look like they are on a continued upsurge. The biggest hit would come in Asian economies where food is such a high share of CPI basket. Property prices are beginning to pick up, so that is sort of feeding into rent inflation, wage pressures are picking up.
The other thing we have seen is that in China where you had a lot of excess rural migrant workers ready to shift to manufacturing sector that is also beginning to dwindle. So, you are also starting to see wage pressures from China, the low cost producer, which is also adding to inflationary pressure. So, yes, inflation is going to be a big issue, not just for Asia, but I think particularly for India. If crude oil remains at USD 90 per barrel or so, food prices despite the expectation that after monsoon now because of the unseasonal rains, prices have not come down and we are heading into a year where output gaps are closing. So, it is becoming very sticky in nature.
Source: Moneycontrol.com
http://www.moneycontrol.com/news/economy/inflation-unlikely-to-be-below-6crude-pressure-nomura_503740.html
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