Inflation to break RBI's comfort zone by Feb '10:Hero Honda

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Inflation to break RBI's comfort zone by Feb '10:Hero Honda

In an interview with CNBC-TV18, Ravi Sud Chief Financial Officer of Hero Honda and Adi Godrej CMD of Godrej Group spoke about the Q2 GDP numbers and the road ahead for the economy.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Is a rate hike on the cards post the +ve Q2 GDP nos? Hero Motocorp BSE | NSE 29/05/12 Are Mutual Funds betting on Hero Motocorp?

In an interview with CNBC-TV18, Ravi Sud Chief Financial Officer of Hero Honda and Adi Godrej CMD of Godrej Group spoke about the Q2 GDP numbers and the road ahead for the economy.

Here is a verbatim transcript of an exclusive interview with Ravi Sud and Adi Godrej on CNBC-TV18. Also watch the accompanying video. 

Q: We are completely taken aback by 7.9% figure. What do you reckon this year might look like now?
Sud: My expectation was anything between 6.3% and 6.5%. So a number of 7.9% is definitely a great number. It has been partly driven by expansionary monetary policy. My only concern today is going forward the inflation number. As far as consumer price index (CPI) is concerned, it is already close to 15.5-16%. As far as wholesale price index (WPI) is concerned, my expectation is that it will cross Reserve Bank of India's (RBI) comfort level by January or February. So it is time for the Central Bank to take some steps to control this expansionary policy, reduce the amount of liquidity and to raise interest rates. So to that extent, this quarter's number is spectacular. We could be subdued to some extent. Particularly because of the agricultural sector but 7.9%, inspite of agricultural sector doing badly is a great number. This means that industrial sector has done well and service sector seems to have done pretty well. The agricultural sector is a drag to some extent because of poor monsoon. The growth could be subdued because of the agricultural sector performance.
Q: You spoke about inflation as being a concern for the Central Bank. This kind of a growth number is quite clearly a number that will put the Central Bank on watch. What is your estimate? Do you think the kind of consumption boom or rather consumption pick up, which we saw in the June-September quarter, is being carried on in October? There are explanations about pre-festive and a whole host of things that kept September looking good. Now we are almost two months into the current quarter. Is the consumption continuing?
Sud: As far as autos are concerned, it is that way. If you look at October numbers for for autos as well as for two-wheelers, the growth momentum has continued. I am sure you will see the same momentum continue in November also. Your apprehensions about the poor monsoon, the impact, slowdown, etc. don't seem to have any impact.
Q: The month-on-month auto numbers were a bit tardy. YoY are always good but month-on-month numbers for October did look tardy. What do you have to say about it?
Sud: That was maybe for one player in the industry. However, if you look at October compared to September, it is a pre-festive month. The numbers would have been extremely high. I am sure that even month-on-month we will see some decent growth.
Q: This is a huge surprise. We are looking at a 7.9% GDP number. Private consumption expenditure has also gone up by about 6%, which is so much better than 1.6% growth in Q1. What is your comment on this performance?
Godrej: This is an excellent performance. All of us were indicating that from observational point of view, the economy is doing very well. Most consumer product companies have posted excellent results in Q2. This confirms that consumer confidence is high, consumer demand remains very strong and that the Indian economy is back to a very high growth rate. To my mind, the GDP growth this year will cross 7% and this trend clearly leads to a possibility of even a 9% growth in the next fiscal.