Barclays’ Economist got it all Wrong

Barclays Capital’s Economist Sailesh Jha has been consistently getting all his forecast wrong since August last year. His forecast started with Inflation touching 17% in 2008 and we know that inflation never went above 13%. In the current year, he predicted rupee will tumble to 56 to the dollar by June. Rupee has appreciated in the past few weeks and is now trading around 50 to the dollar. Dollar-Rupee movement is highly correlated to Sensex movement. So Rupee will hit 56 only if Sensex tumbles to 7000.  Since anything can happen in the next two months, we will see how the prediction pans out. Jha predicts that bonds yields will fall to 5.1 by the end of Q2CY09. Yields are currently trading at 7.01%. With the huge government borrowing in the coming quarter, I am sure his prediction will fail. According to the Barclays economist, Indian economy is likely to grow by 4% in FY10. If our economy can grow by 5.3% in a tight liquidity scenario, we will probably grow above 5% in an easy liquidity condition. Infact, we have seen signs of recovering in Q4FY09 in major industries except textiles and gems and jewellery. I believe the effect of low interest rates have been underestimated by economists and analysts.

I hope Barclays is not acting on his forecast. But then for what is he paid for ? Unfortunately, Economists don’t get fired too easily. As someone rightly said,” When your neighbour loses a job, its a recession and When an economist loses a job, its a depression“.