The August index of industrial production (IIP) will be announced on October 12. In an interview to CNBC-TV18, Ramya Suryanarayanan, economist at DBS Bank said, the number may come in around 5.5%, year-on-year (YoY). “The August IIP may not be a cause for cheer. It will be a cause for worry.”.......
The August index of industrial production (IIP) will be announced on October 12. In an interview to CNBC-TV18, Ramya Suryanarayanan, economist at DBS Bank said, the number may come in around 5.5%, year-on-year (YoY). “The August IIP may not be a cause for cheer. It will be a cause for worry.”
Her gross domestic product (GDP) forecast for 2011-12 is 7.5%. She doesn’t expect RBI to hike rates in the next policy meet.
Excerpts from Markets Midday on CNBC-TV18 Watch the full show »
According to her, FY12 fiscal deficit may be worse than consensus.
Below is the edited transcript of her interview on with Ekta Batra and Latha Venkatesh. Also watch the accompanying videos.
Q: How have you read the PMI numbers? Is it much watched or is it too young an index and shouldn’t be taken too seriously?
A: Both the points are true. On one hand, PMI has weakened quite sharply, especially the services PMI. And that doesn’t augur well for growth.
On the other hand, this is the data series for the short history and has not consistently predicted gross domestic product (GDP) growth very well. For example, in early part of 2007, the PMI moderated quite a bit, but the growth was quite strong during that period.
So, there has to be a pinch of salt with which we have to take this data. We cannot neglect it either considering that index of industrial production (IIP) data has its own issues. We don’t have much data on anything else in the economy.
Another thing is credit data. Money supply data also shows quite a bit of moderation, especially in sequential terms. And if we think about it, PMI was also sequential number. It is not year-on-year number because the survey measures whether output has improved from the previous month or not. So that is a big difference.
If you look at IIP and money data on a sequential basis, money data is also showing quite a bit of moderation. Actually it seems like credit to commercial sectors moderated to some 12% or so, much lower than where the YoY is right now.
I would think there is a bit of soft patch in August-September, maybe October. It’s just not clear how long that would last. My guess would be probably not too long at this kind of low levels, but definitely it is a risk to the growth outlook.
Our forecast is 7.5% for 2011-12. We think now the risk to that outlook lie to the downside and we may be revising down our GDP forecast.
Q: Does the PMI have any connection at all to the IIP? We are getting August IIP number on October 12. Any guesses as to how the IIP might pan out?
A: We have the core IIP already. And that hasn’t been too good either. There was a sharp drop both year-on-year (YoY) as well as month-on-month. According to our calculations, month-on-month seasonally adjusted actually dropped 2.5%. That is just in a single month, not annualised.
It would be difficult to imagine IIP to have expanded on a sequential basis in that backdrop. So, I think the August IIP may not be a cause for cheer. It will be a cause for worry probably. It maybe around 5-5.5% YoY.
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The August index of industrial production (IIP) will be announced on October 12. In an interview to CNBC-TV18, Ramya Suryanarayanan, economist at DBS Bank said, the number may come in around 5.5%, year-on-year (YoY). “The August IIP may not be a cause for cheer. It will be a cause for worry.”
Her gross domestic product (GDP) forecast for 2011-12 is 7.5%. She doesn’t expect RBI to hike rates in the next policy meet.
Excerpts from Markets Midday on CNBC-TV18 Watch the full show »
According to her, FY12 fiscal deficit may be worse than consensus.
Below is the edited transcript of her interview on with Ekta Batra and Latha Venkatesh. Also watch the accompanying videos.
Q: How have you read the PMI numbers? Is it much watched or is it too young an index and shouldn’t be taken too seriously?
A: Both the points are true. On one hand, PMI has weakened quite sharply, especially the services PMI. And that doesn’t augur well for growth.
On the other hand, this is the data series for the short history and has not consistently predicted gross domestic product (GDP) growth very well. For example, in early part of 2007, the PMI moderated quite a bit, but the growth was quite strong during that period.
So, there has to be a pinch of salt with which we have to take this data. We cannot neglect it either considering that index of industrial production (IIP) data has its own issues. We don’t have much data on anything else in the economy.
Another thing is credit data. Money supply data also shows quite a bit of moderation, especially in sequential terms. And if we think about it, PMI was also sequential number. It is not year-on-year number because the survey measures whether output has improved from the previous month or not. So that is a big difference.
If you look at IIP and money data on a sequential basis, money data is also showing quite a bit of moderation. Actually it seems like credit to commercial sectors moderated to some 12% or so, much lower than where the YoY is right now.
I would think there is a bit of soft patch in August-September, maybe October. It’s just not clear how long that would last. My guess would be probably not too long at this kind of low levels, but definitely it is a risk to the growth outlook.
Our forecast is 7.5% for 2011-12. We think now the risk to that outlook lie to the downside and we may be revising down our GDP forecast.
Q: Does the PMI have any connection at all to the IIP? We are getting August IIP number on October 12. Any guesses as to how the IIP might pan out?
A: We have the core IIP already. And that hasn’t been too good either. There was a sharp drop both year-on-year (YoY) as well as month-on-month. According to our calculations, month-on-month seasonally adjusted actually dropped 2.5%. That is just in a single month, not annualised.
It would be difficult to imagine IIP to have expanded on a sequential basis in that backdrop. So, I think the August IIP may not be a cause for cheer. It will be a cause for worry probably. It maybe around 5-5.5% YoY.
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