NDTV: Looking at the earnings picture in the consumer related earnings space including McDonalds and Amazon, it does seem to be reflecting some kind of uptrend in consumer spending?

Prior-Wandesforde: Yes, what we are starting to see is some kind of modest recovery in consumption space that goes beyond the Cash for Clunkers schemes. I think consumers are spending a little bit and that would continue but we are not going to see huge V-shape recovery on the consumer side given the need to deleverage further. The results from a macro economic basis show that there is a huge growth in productivity in the third quarter but at the same time wage growth was quite low. The unit wage costs (the labor cost of consistent unit of production) – by far the biggest element of most companies cost – looked to be very low in the third quarter. I think this is going to be reflected very increasingly in the third quarter numbers. There may not necessarily be topline growth but not too bad bottomline growth.

NDTV: Leading economic indicators are reflecting that even the upsides going into the next quarter are there. It may not be sharp but it would perhaps be modestly there?

Prior-Wandesforde: Yes it is. The leading economic indicators have shown a V-shape improvement in the US, obviously following a very sharp deterioration but it has bounced back quickly. Of course part of that will be the improvement in the equity market. I think it will be wrong to give the impression that everything is bad in the US macro economy as there are some visible signs of life.

NDTV: Can we read good economic indicators in China as a cue that China would now start to look at tightening its economic stimulus packages?

Prior-Wandesforde: Yes may be! China's gross domestic product growth of 8.9 per cent year-on-year in the third quarter, is roughly in line with expectations. The growth is up from 6.1 per cent a couple of quarters ago, so it is seen as a decent recovery as it is back to the kind of levels it normally has. The policy authorities now beginning to think about inflation to build up and to balance that with growth. The authorities certainly haven’t dropped their focus on growth but they have mentioned the possibility of inflation rising. So what we are looking at is reserve ratio hike.

NDTV: What do you expect from the RBI in its monetary policy review?

Prior-Wandesforde: The senior members at the Reserve Bank of India are clearly thinking about to tighten policy to act preemptively to avoid commodity induced inflationary pressures. On the other hand the Indian government has made it crystal clear that they would strongly oppose any such action so it is going to be a fascinating meeting. In my view it is going to be the government who will win this time and I don’t think we are going to see any changes in policy rates. We could see an increase in cash reserve ratio and even there that’s unlikely. I suspect the first the first actual policy rates move would come in 2010 and I expect CRR hike in the first three months of 2010 and reverse repo rates rising in second quarter of calendar year 2010. So it is coming but I am not sure whether it is coming this week.