Expect Indian economy to pick up next year: India Inc

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Expect Indian economy to pick up next year: India Inc

Corporate India is hopeful that the industrial output will pick up ahead. According to them, global problems were weighing on the Indian economy. Since the global economy is improving now, they feel it will have spill over effect on India as well.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » Videocon Int BSE | NSE 01/01/70 Are Mutual Funds betting on Videocon Int? Other Stocks in this news GMR Infrastructure |

Moneycontrol Bureau

Disappointing! That is the word that you will hear from experts, economists, when you ask them about December index of industrial production (IIP). India's industrial production growth has slowed down sharply in December to 1.8% versus 5.9% in November, slowest pace in two months.

However, corporate India is hopeful that the industrial output will pick up ahead. According to them, global problems were weighing on the Indian economy. Since the global economy is improving now, they feel it will have spill over effect on India as well.

Venugopal Dhoot, chairman and managing director of Videocon expects the Indian economy to pick up pace next year. "Our economy was not doing well because global economy was doing badly. Now, it seems that the worst is over for the global economy," Dhoot explains.

On an optimistic note, Dhoot feels the IIP number suggests that people want to buy. "People have got money. The only thing they require is interest rate comfort."

A Subba Rao, group chief financial officer of GMR Infrastructure echoes similar sentiment. Rao says, the global factors are improving. "The US seems to be doing well. Europe's problem resolution seems to be on the way out. Once the global problems recede to the background, I think the capital flows would improve," he adds.

Also read: Rangarajan disappointed at IIP; hopes FY13 GDP to be 7.5%

Consumer durables sector stands out!

The sector grew 5.3% in December versus 11.2% month-on-month (MoM) basis. Dhoot says, it is a very good growth for the consumer durable industry to which Rao agrees. Rao asserts that growth in IIP has been coming from consumer durables.

Meanwhile, Dhoot sees 15% growth in consumer durables sector in February. "At the ground level, we see there is huge demand for consumer goods, especially from the rural area. Now, demand in the urban area has also started. Air conditioner, refrigerator are seeing a heavy demand. Although there is a cold wave going on in India, demand for these goods is still very good," he explains.

Capital goods sector concerns!

The capital goods sector witnessed sharp contraction, falling to negative 16.5% versus (-) 4.6%. However, Rao feels that this was expected on account of systematic destruction of the demand that was planned by hiking the interest rates. "At the ground level, there is not much of investment. The banks credit growth is pretty sluggish in certain cases. There is no credit growth at all," he adds.

According to Rao, investment will not come into the power sector, unless the fuel issue, discoms issues and environmental issues are sorted out. "The interest rates have added to the bad sentiment," he adds.

Company insight!

Meanwhile, commenting on the GMR Infra, Rao pointed out that the airport segment is performing well in terms of traffic and volume growth.

"Delhi airport has registered good traffic and volume growth. The company hopes to move to new tariff regime for Delhi Airport from April 2012," he elaborates.

GMR's gross debt stands at Rs 30,000 crore and net debt at Rs 25,000 crore. Rao says, gross debt has gone up quarter-on-quarter (QoQ) due to borrowings for certain on-going projects.

Vini Amesar.
vini.amesar@network18online.com