While the Prime Minister and Finance Minister have been hard-selling the India growth story to global investors, there are inherent risks to emerging economies, given the uncertainties in the global economy. Bloomberg TV India spoke to Rashesh Shah, Chairman & CEO, Edelweiss Group, on the economic outlook.

You were with the FM during his road shows in Singapore and Honk Kong. What were your takeaways from those interactions with investors and policymakers?

India is a very exciting market. The way the world is heading, India is one of the few bright spots. It is because India is very inversely coded with the world slowing down, oil prices coming down and commodity prices lowering. So India always outperformed when the economy was not doing well, which has been the case in the last few months. Everybody is convinced that India holds promise. They (investors) have obviously committed quite a few investments out here. We are also seeing a lot of FDI coming in and we had one of the highest FDI inflows this year in India. But the concern is around emerging markets as most of them are not doing well. Unfortunately India is also classified as an emerging market. The current headwinds at emerging markets are the only setbacks by which India can get affected.

All eyes are on RBI Governor Raghuram Rajan and whether the rate cut is going to be aggressive. What do you think?

There should be an aggressive cut. RBI is conservative and they will make sure they err on the side of caution as far as inflation is concerned. We have quite a bit of room to cut rates aggressively so that you front-load them because otherwise 25 basis points here and there gets absorbed by the economy without really spurring confidence. That’s because the main job of interest rate cut is to spur confidence among consumers.

The Governor has reiterated to not look at rate cuts to boost economic activity. But the inflation rate doubled by 2011. What’s your reading of it?

Inflation is always a risk. But somewhere you need to take a call on the future. In the end, it is all about taking a calculated leap using a hypothesis of the future. There is a global deflation going on. The way you import inflation, you also import deflation from the world. We are importing deflation from the world because there is excess capacity all over the world and global demand has collapsed. So in that case India can afford to take a risk.

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