Reconstructing Index is primary concern: KV Kamath

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

KV Kamath , MD, ICICI , has been appointed the President of CII (Confederation of Indian Industry). He said, "Our index is not right; index has not been recalibrated. So to reconstruct the index is primary and we need to do that first. Finally, according to me growth is strong and continues to be strong."

Excerpts from the press conference:

"Performance is strong (a) because of strong growth in corporate profitability and GDP and (b) because of better and wider collection and the tax-GDP ratio has shown a good increase to 12.5%. This is something that always has been the focus of all people covering the corporate sector. We continue to have robust corporate performance over the last four quarters and the numbers that have come out for the fourth quarter also indicate that both topline and bottomline growth are healthy. Maybe outlier who are in pain, I am not saying there are no outliers, but if one takes the bulk of performance; the bulk of performance is still positive.

But in our case all this will be documented; to me it's very clear then when an investment of USD 700 billion is happening, growth will not slacken. So that itself becomes an engine of growth. The answer is I don't expect growth to slacken for that reason, that is why the number put in by CII of 8.3-8.6, I stick to the higher number that our growth will continue to surprise us in a positive way.

We were always tracking on base and we will have to track the growth that's happening on the base. Second, positive or negative, I am not very sure of IIP numbers. I think we will need to have certainty on that. I start with certain basic criticism which I made for the long-term; (1) our index is not right; index has not been recalibrated, I don't know for how many years. I think for last 15-20 years index is not recalibrated. So let me put things in context - when those items were there in the index today, some of them don't have relevance at all and the items, which are relevant today are not there in the index or which were there in the index, their weightage was very less.

So to reconstruct the index is primary and we need to do that first then to what date does one set the index and one look at it going forward.

So I think we have only broad proxies; I would rather go by anecdotal evidence which I call distilling information. And finally today thanks to media, the profitability performance of corporate comes within one month, is all recorded and done.

There is a disconnect - if corporate profitability continues to be strong you can look at how many outliers are there and so on, so it is a disconnect to the actual industrial production.

So will have to take everything with a bit of a pinch of a salt, but according to me growth is strong and continues to be strong."