The Q4 GDP growth in FY07 is seen at 9.1%, as compared to 10% in the same period last year. For FY07, GDP growth was 9.4%, as against 9.2% last year.
Indranil Sengupta, Chief Economist of Kotak Institutional Equities said that now that the GDP numbers are good, it will help inflation come down to 5%. He further added that he did not see a hike in interest rates. He added that they were looking at a soft landing and that the overall picture is still optimistic.
Meanwhile, Mahesh Vyas, Managing Director & Chief Executive Officer at CMIE , said that the economy is doing well. He however added that they had estimated a 8.5% growth in 2007-08, which they still maintain.
Excerpts from CNBC-TV18's exclusive interview with Indranil Sengupta and Mahesh Vyas:
Q: The Q1, Q2 and Q3 numbers have been revised higher; the Q2 numbers are higher by a whole percentage point. What would you do with your FY08 estimates? Are you pushing them higher?
Sengupta: We are looking at 8.2% growth in FY08 and are basically looking at a soft landing, now that inflation has begun to top off as we expected. So, the overall picture remains optimistic.
Q: Have you revised your numbers after looking at this or will you be revising?
Sengupta: No, we had expected a 9.2% growth this year and this is just marginally above that. So, we have not revised our numbers.
Q: What is your comment on this revision of numbers in the first three quarters?
Sengupta: I think numbers do get revised during the quarter. The quarterly numbers are pretty volatile, not only in India, but everywhere else in the world and even in the US.
There is still a lot of strength left in the Indian economy though we do expect some softening ahead, because of higher interest rates and some degree of capacity utilisation. We are looking at a soft landing and a pretty strong year of growth ahead.
Q: The revision of numbers, if compared with the advance estimates, have been fairly strong. The advance estimates had put the manufacturing sector at 11.3% and the final figures have come in at 12.3%. Likewise, the services sector was put at 9.4%, while the final figures were at 10.7%. What is your first thought on this very strong upward revision?
Vyas: The initial numbers were a little cautious, but the economy is doing much better than expected. If there was an expectation that the numbers are too good for too long and has called in for some caution, then the economy has proved it wrong. So, the economy is just doing too well.
Q: What would your estimates be, for FY08 under the circumstances that there is a very strong FY07 performance? Are we perhaps going to see some more rate hikes?
Vyas: I think the economy is doing well and these numbers do not change our forecast. We had estimated 8.5% growth in 2007-08 and we maintain that.
Q: The manufacturing numbers that have come in, show that it has been quite the outperformer over the last couple of data that have come out. Do you see it sustaining around the 12% mark, or do you think by the end of 2007, going into 2008, these numbers may actually cool off a bit?
Vyas: I see no reason why they should be cooling off. These are the result of the investment happening and the key growth factor in this is, capital goods. In our numbers, we see that the capex is still going on strongly. So, I see this sustaining itself, at least for a year, or maybe even more.
Q: What are you expecting from the RBI? Do you think that they will still be in a mood to push rates up, given these kind of numbers?
Sengupta: There is no case for the RBI to raise rates. There is no systemic overheating of the economy, as some people say. These are essentially supply side shocks that drove inflation up and now that the supply side shocks are reversing, inflation is beginning to come down.
My concern is that as and when the RBI does intervene in a big way into the forex market, there could be a possibility of a CRR hike. Otherwise, if rains are good, we are looking at inflation around 5%. There is certainly no case for tightening.
Q: The rate hike is making the problem worse on the forex front. Do you think that the RBI will not be moved by these numbers into hiking rates?
Vyas: I won't speculate on what the RBI will do. All I can say is that, the efforts in the past to raise interest rates have not hurt the capex cycle. Investments are still robust and companies are still reporting good profits. So, I do not fear a rise in interest rates and see a low likelihood of such a scenario.
Indranil Sengupta
Q: The Q1, Q2 and Q3 numbers have been revised higher; the Q2 numbers are higher by a whole percentage point. What would you do with your FY08 estimates? Are you pushing them higher?
Q: The revision of numbers, if compared with the advance estimates, have been fairly strong. The advance estimates had put the manufacturing sector at 11.3% and the final figures have come in at 12.3%. Likewise, the services sector was put at 9.4%, while the final figures were at 10.7%. What is your first thought on this very strong upward revision?
