In an exclusive interview with ET Now’sMD & India Equity Strategist,says in the coming months one can expect some increase in choppiness. Edited excerptsWhat has happened is that China seems to have stabilised. I think it is the first time in several years that we have seen China growth forecast getting nudged up. Commodity prices have actually started strengthening a bit. Europe has been surprisingly resilient in face of economic concerns following Brexit . So far, there is very little in the macro indicators to have disappoint the people.But we are headed into a period of turmoil. It is not just the elections. If the global economy continues to show some signs of strength, then Fed will want to raise rates, ECB will start tapering off QE. BoJ has already been forced to change their approach because they were running out of bonds to buy. So there is a lot that is going to change from the monetary policy perspective globally and in the coming months you may actually see some increase in choppiness.The day the surgical strikes took place, there was market churn. We also held a call with the experts and clearly these are things that are of the realm of our understanding. The experts said very convincingly that this actually could be a stabilising force and not a destabilising force. Even if there was a kind of escalation, it mostly stayed at the borders.The fact is if you have a business or a listed stock which has operations around the world, they get disrupted and if this escalation lasts very long then there could be a fiscal impact. Basically, government’s very nice fiscal consolidation path could get disrupted for maybe six months or 12 months. So those are the only two ways in which financially this can impact. But on both these issues, the experts we had in our call very convincingly said that it does not look likely.Some of the recent updates that we are seeing in some Pakistani newspapers shows that perhaps it is causing more introspection there than it is causing here. The Security Council refused to acknowledge or even consider this as a conflict. The fact that there has been no international condemnation of what India has done also adds to it.The economy has been very slow in the last four, five months. The growth momentum which was running along very well till maybe March-April from May-June onwards has started to slow. While some indicators like car sales and two-wheeler sales and tractor sales have shown some pockets of strength, by and large it does not seem very far reaching and widespread. Oil demand has been a bit patchy, power demand growth very poor, credit growth at multi decade lows and all of that. So it is a not a very robust economy.Will the economy revive robustly? This year the state governments are also doing a lot of capex; a number of them have actually expanded their fiscal deficit targets; the central government is spending a lot more than last year and some of those only take off after October-November. I hope that by December-January, the results will start showing. The GST bill got passed. I am very happy and positive and I think it is a great development for India from a medium term. The process can sometimes cause the economy to freeze in pockets because people do not understand what is going to happen.See the point is that, yes, the delay of GST implementation cannot go beyond 16th September 2017, which is what I am starting to call the GST cliff because as per the constitutional amendment, within one year of notification of the clauses, rights of the central and the state government to levy excise duty, sales tax and all the taxes, getting service tax, all the taxes get subsumed under GST. It will be illegal for a state government to charge sales tax after 16th September 2017 and therefore that becomes a hard deadline. You cannot delay it beyond that.The 1st April deadline seems like a very hard deadline. Hard deadlines help as it allows the government to give a message that it is happening, start preparing for it. But if they really start on 1st April, I do not see much preparedness among software companies, ERP vendors, large corporates, forget about the small companies who may not even know about it. Everyone is uncertain about how they are going to do it. Therefore, for a 1st April start which requires that the bills get passed by November so that the states and the centre know what to put in the budgets. If instead, it was 1st July or even 1st September, then perhaps there would be more room for some of these niggles to get ironed out.I do not think anyone has any numbers on GST and it is possible to have any numbers on GST. The challenge in GST is that it is such a transformational change that it is very hard to estimate the impact and there will be a near term impact which is actually quite disruptive and there is a medium term impact which is actually quite positive.The one assumption that a lot of people have been making is that tax rates will fall. They are thinking that the indirect tax rates for certain categories which is like 26-29% will become 18% because that is the standard rate. But people may be disappointed because items that are currently facing a high rate of sales tax and a high rate of excise duty of 26-29%, are most likely will get mapped to 26% and therefore nothing changes for them.I suspect that at least in the FY18 forecast that we see right now, any GST built in. So even if it gets delayed by three, four months, six months...There is this obsession that earnings are getting cut. What matters for the market is how fast they are getting cut and from what base they are getting cut because if you go through one year and the one year forward earnings estimate is 15% higher whether it fell from 25 and you say there was 10% earnings cut and it grew 15%, so the market is 15% cheaper right. So the pace of cuts and the starting point of that both matter a lot. I think what has happened in the past 15 months or let us say the 15 months before the past three months, was that the pace of cuts was very strong. Every three months we would see a 5-6-7-8% kind of cut because commodity prices were being cut and a lot of people and banks were taking writedowns. As a result, one year forward earnings was not moving. The roll forward impact was getting negated by the cuts.What has happened in the last three months is that the pace of cuts is now less than 1% and therefore as you have gone through the last three months and the market has been broadly flattish. The PE multiple has actually come down because now it is pricing in three more months of the next year.What happens in Q2 and Q3? I fear this quarter’s earnings would actually disappoint the market. It is quite possible that at least on the banks side, which are a very large part of the index, you could see much greater recognition of problems.You could see that because none of these problems are getting resolved.Bank management or for that matter any management, have to be positive and motivate hundreds of thousands of people. It is our job as analysts to look at what is realistic and I am not saying they are lying. What we are saying is that there is a lot of network effect in bank NPA recognition as well.As other banks start writing down their assets or declaring NPAs, the banks that have also lent to that asset but were earlier thinking that this company looks okay are then forced to recognise them as NPAs as well. But how much have you provisioned against it? Have you provisioned 20%, 30%, 40%, 50%, 80%? So we fear that those risks can actually come up.I do not think. For the private banks, I think the watch lists are quite right there but maybe the provisioning against those can increase. For the PSU banks, it is possible, even that yields have fallen and they could book some gains on bond sales but my view is that the problems on NPA side will persist. On the staple side, our consumer analysts put out a review note. The volume growth that we are going to see this year or this quarter is going to be perhaps the worst in the last three years.I have been saying that if food inflation falls and wage growth is low and construction companies benefit, the bottom of the pyramid is really struggling. To give you a perspective, I will take a step back. The world is battling a problem of robots taking away manufacturing jobs and I think there are fund managers and analysts are struggling to save their jobs from algorithms. We seem to be at the other end of the spectrum, almost a medieval problem wherein 48% of our workforce grows food for us.It is a very large number. It is 230 million people and while the percentage of workers in agriculture has been falling, the number of people in agriculture has not fallen. As productivity in agriculture improves, as farmers get access to phones, better roads, electricity, decent law and order, more awareness, educated sons and daughters, their productivity starts to go up.Now the problem is that food demand does not grow that fast. I mean it cannot grow beyond a certain point, the incidence of abject hunger has fallen. I think the last time I was here we discussed that per capital calorie demand is falling, population growth has slowed to 1%. If you produce a lot more food, what are you going to do with it?The global market for food is no longer strong and therefore, you are going to hit big surpluses. How farmers respond to that is by cutting costs. Cutting of cost means they will automate, they will use weedicide, pesticide instead of people to cut it. They will use fodder crops. They will use milking machines instead of getting labour to milk their cows and buffalos. So agriculture will start shedding people.The rise in productivity, while it is great for the listed part of the economy because then you see housing demand starting to improve as mortgage rates come down and a lot of discretionary demand starts to go up.Banks start to feel better but on the other hand, the bottom third of the economy, the 48% who are working in agriculture -- some of them are large land owners and perhaps are better off and the bottom third do not own land as well. So it becomes a policy and a political issue. The government is very aware of the problem. It is very hard to find solutions to this problem.Solutions even if they are implemented will take multiple years for tens of millions of jobs to get created and in the interim we actually have very low real wage growth at the bottom of the pyramid. That is the reason why low-end washing powder is not selling, that is why cream sachets are not selling, that is why large consumer companies are having problems in the general trade channel.I keep insisting that it is not about urban and rural, it is about agri and non-agri. In rural, the non-agri part is actually doing very well.They are seeing unprecedented improvement in infrastructure available to them. They are getting electricity, roads, better law and order, better facilities from the government and so it is about the agricultural part. This is another reason why you are seeing weak cement demand growth because housing, 48% of the households who have seen weak income growth because they are agriculture and this year everyone is hoping that good volume growth will mean good income growth but as we fear prices could actually fall or may not go up that much, so for those 48% of the people there is not enough money to invest in new houses, new rooms, new floors.