All is set for improvements in the macros in H2: BK Batra, IDBI

In a chat with ET Now, Mythili Bhusnurmath, Consulting Editor, and BK Batra, Former ED, IDBI discuss macro cues and how much has been done on the policy front from the government side and from RBI’s side. Edited excerpts

ET Now: The focal point continues to remain the currency trading. The rupee is fairly weak this time versus the greenback?

Mythili Bhusnurmath: It certainly is a little weak but it is nowhere near what people were anticipating when there was talk of the FCNRB redemptions. So rupee has held on quite well because the fears that we had of what the FCNRB redemptions will mean that the wholesale outflow of dollars from India the rupee would plunge... none of that really has happened. I do not anticipate too much weakness going forward because we have seen strong dollar inflows as well.

At the macro level, I do not think we are going to see any major movement on any of the basic macroeconomic fundamentals until such time the Fed chooses to act. Now that most opinion is reeling around to a December hike post the US elections, we will see the next bit of weakness somewhere in December. This is not so at the moment and that is pretty good going as far as India is concerned.

I am not sure whether Mr Batra agrees with my view that for the moment we really do not have to worry very much about the macro fundamentals. They are fairly sound. We would not see any sharp movements come December then perhaps we would see a fresh spurt of increasing volatility and higher uncertainty. Would you agree with that assessment?

BK Batra: I would broadly agree and would say that the macros look to be fairly stable at the moment and in fact if you look at the banking sector, it is also emerging out of its difficulties. The first half is getting to be over and the second half would actually give a little leg up to the seasonal demand and with expectations of dovish announcements from the Mint Street, I think all is set for improvements in the macros if not continuing stability.

ET Now: While the currency has held out at 66.72 and like Mythili pointed out, the resilience in the currency has been remarkable. I also think the support that is coming in with forex reserves being at record highs is a good cushion to maintaining the currency’s levels at this juncture. But going forward what is the broad view in terms of the macro indicators that you are picking because all eyes are really on how there could be a pickup in growth essentially supported by the series of rate cuts that we have seen thus far and perhaps more being in the offing, inflation seems to be stabilising but like I said the major discussion point is when will credit growth pick up in a meaningful manner? So all is being done at the policy level to push for growth but we are not really seeing activity change on the ground, how do you map the situation, when do you see things looking up in terms of loan growth?

BK Batra: As you said, pretty much has been done on the policy front from the government side, from RBI’s side and we have a policy framework in place in various sectors from the RBI side also several steps have been taken to recognise stress and to resolve stress.

What one can see is that on the side of consumer credit demand there is some movement and I would not go into public sector and private sector banks having different rates of growth but overall credit growth if we see on the retail side, on home loan front, on automobiles front, vehicle loans front, personal loan fronts there has been upward movement and it is expected to get stronger as we move forward in the third quarter and fourth quarter.

On the side of investment demand also we see some movement on renewables space and the road sector and a bit on the working capital additional demand from, I would say, a large group of industries. Where we seem to have not been able to still find solution is the large and mid large cases which are stressed and which need some last mile funding which needs some support and that kind of support we need to work out some mechanisms to provide.