ET NowIn an interview with ET Now, Saugata Bhattacharya, Axis Bank, sahres his views on the Indian economy. Excerpts:
ET Now: Minus 3.81 per cent, the contraction has been slightly more than what you were estimating?
Saugata Bhattacharya: It is good news. Remember those days when we used to monitor these on a weekly basis, fortunately that has stopped, but I think as you said more or less on track the way that we are thinking that the WPI and CPI inflation will progress over the next three or four months.
We actually see a return to the positive territory in February at plus 0.3 per cent, and we close the year at about 1 per cent odd for the year for the WPI.
So broadly on track, and how this translates into CPI going forward is something that we are all waiting and watching. Commodities remain fairly weak and I do not see signs of commodities moving up any time in the near future, but the worry is that in terms of, of course these are transient phenomenon more than deep underlying structural factors in the economy.
But even the rabi sowing season does not look to be very good, soil moisture conditions etc are not very good, so our sense is that agriculture of primary commodities will still keep some pressure on both the WPI and the CPI numbers.
ET Now: I personally would be fairly happy if indeed WPI would inch up a little bit, producers show kind of pricing power, it just shows that some bit of a pickup in the economy, I would not want CPI to inch up too much, but it is about time that there is a semblance of sanity when it comes to WPI and manufacturers do have some pricing power as well?
Saugata Bhattacharya: I completely agree with you. I think that is very well said that right now rather than obsessing about how much commodities would be pulling the WPI down, of course you will see the WPI inching forward, but it is more the pricing that you see on the ground.
The Q2 numbers that we have seen does seem to indicate that on the revenue side, they are not getting too much traction.
Whatever improvement in margins that you are seeing is coming in from raw materials and other costs.
So you are completely right, that maybe we should be looking for some signs and actually everybody asks us that do you see any signs of growth recovery on the ground, and it is precisely what you are talking about in terms of the ability of companies, corporates to price their output which remains a key concern.
We are still at capacity utilization overall from the RBI numbers of about 70-71 per cent, many sectors have far greater idle capacities lying around.
I think this is a very-very important point that you have brought up that what is the actual balance that you see of some improvements and some recoveries coming in from the pricing side.
ET Now: I would like to get in your thoughts as well October trade data is expected this time, what would be your expectations around that?
Saugata Bhattacharya: I would hesitate to give you an actual number for exports and imports on the deficit but quite obviously exports are not going to do well. Only thing is how imports are doing.
Actually there are a couple of concerns, yes as we just heard that gold is one of the areas that we look to see, whether again there is a spurt in gold imports but we are told that there is very little domestic demand for gold this time, so I do not see a major surge.
I think that most of the gold imports that would have come in would have already have come in. So I do not see that that is a problem.
The problem that we are beginning to see is increasing imports of crude and other petroleum products, particularly petrol and diesel. Those are actually growing at very high rates.
Petrol is growing at about 26 per cent, the last number that I saw, diesel is also about 20 per cent and petrol was 26 per cent over and a 21 per cent growth last year for the month of September.
That has now begun to emerge as an area of concern that with petrol prices and diesel prices coming down, consumption has increased. Diesel to a certain extent you can understand with pump sets and so on to offset the lack of the rains, but petrol consumption has begun to emerge, particularly as far as I am concerned, that consumption of motor vehicles and the use of motor vehicles seems to have increased.
That is a problem in an environment where exports are likely to remain relatively weak for some time, and many imports related to actually productions on the ground, machine tools, mechanical equipment and so on those have weakened over the last couple of months.
ET Now: Minus 3.81 per cent, the contraction has been slightly more than what you were estimating?
Saugata Bhattacharya: It is good news. Remember those days when we used to monitor these on a weekly basis, fortunately that has stopped, but I think as you said more or less on track the way that we are thinking that the WPI and CPI inflation will progress over the next three or four months.
We actually see a return to the positive territory in February at plus 0.3 per cent, and we close the year at about 1 per cent odd for the year for the WPI.
So broadly on track, and how this translates into CPI going forward is something that we are all waiting and watching. Commodities remain fairly weak and I do not see signs of commodities moving up any time in the near future, but the worry is that in terms of, of course these are transient phenomenon more than deep underlying structural factors in the economy.
But even the rabi sowing season does not look to be very good, soil moisture conditions etc are not very good, so our sense is that agriculture of primary commodities will still keep some pressure on both the WPI and the CPI numbers.
ET Now: I personally would be fairly happy if indeed WPI would inch up a little bit, producers show kind of pricing power, it just shows that some bit of a pickup in the economy, I would not want CPI to inch up too much, but it is about time that there is a semblance of sanity when it comes to WPI and manufacturers do have some pricing power as well?
Saugata Bhattacharya: I completely agree with you. I think that is very well said that right now rather than obsessing about how much commodities would be pulling the WPI down, of course you will see the WPI inching forward, but it is more the pricing that you see on the ground.
The Q2 numbers that we have seen does seem to indicate that on the revenue side, they are not getting too much traction.
Whatever improvement in margins that you are seeing is coming in from raw materials and other costs.
So you are completely right, that maybe we should be looking for some signs and actually everybody asks us that do you see any signs of growth recovery on the ground, and it is precisely what you are talking about in terms of the ability of companies, corporates to price their output which remains a key concern.
We are still at capacity utilization overall from the RBI numbers of about 70-71 per cent, many sectors have far greater idle capacities lying around.
I think this is a very-very important point that you have brought up that what is the actual balance that you see of some improvements and some recoveries coming in from the pricing side.
ET Now: I would like to get in your thoughts as well October trade data is expected this time, what would be your expectations around that?
Saugata Bhattacharya: I would hesitate to give you an actual number for exports and imports on the deficit but quite obviously exports are not going to do well. Only thing is how imports are doing.
Actually there are a couple of concerns, yes as we just heard that gold is one of the areas that we look to see, whether again there is a spurt in gold imports but we are told that there is very little domestic demand for gold this time, so I do not see a major surge.
I think that most of the gold imports that would have come in would have already have come in. So I do not see that that is a problem.
The problem that we are beginning to see is increasing imports of crude and other petroleum products, particularly petrol and diesel. Those are actually growing at very high rates.
Petrol is growing at about 26 per cent, the last number that I saw, diesel is also about 20 per cent and petrol was 26 per cent over and a 21 per cent growth last year for the month of September.
That has now begun to emerge as an area of concern that with petrol prices and diesel prices coming down, consumption has increased. Diesel to a certain extent you can understand with pump sets and so on to offset the lack of the rains, but petrol consumption has begun to emerge, particularly as far as I am concerned, that consumption of motor vehicles and the use of motor vehicles seems to have increased.
That is a problem in an environment where exports are likely to remain relatively weak for some time, and many imports related to actually productions on the ground, machine tools, mechanical equipment and so on those have weakened over the last couple of months.
Get Unlimited Access to The Economic Times
