Jan IIP at 16.7%: How warranted is the sense of optimism?

Excerpts from India Tonight on CNBC-TV18 Watch the full show » RELATED NEWS Is India getting into a new paradigm of growth? IIP to be double-digits for several months: HSBC Jan IIP growth at 16.7% vs 1% (YoY); RBI action inevitable

Q: Are you at all concerned that the increase in excise and customs duties as well as the increase in Minimum Alternate Tax (MAT) could slowdown growth or do you believe that the extra money the Finance Minister has put in to taxpayers pockets is sufficient to sustain the momentum. Which way do you go on that?

Maira: These small adjustments, I am calling them small adjustments that you are mentioning, are not the point. I agree with Shankar and you also, there are grounds here for optimism, but just as don't leave it at that. Things seem to be working all right, if we leave it alone, it will continue to be working all right and we will have a long sustained growth in manufacturing. I fear it's not going to be like that. One would hope so, but we need to do some serious work to lift the rate of manufacturing growth and also the quality of manufacturing growth to provide the results that the country expects from manufacturing inclusiveness, more employment, more depth and therefore more sustainable growth.

Q: The Finance Minister keep saying and he says this repeatedly that his proposed petrol and diesel price hike will only add 0.41% to inflation, the opposition on the other hand talk of a cascading effect. Who of the two do you agree with?

Munjal: Fuel always has a cascading effect. It is obvious because you are going to add the impact of that cost on all movement of all goods and people. We had already beginning to see some of the impact coming on things like steel and aluminum and that as you know has a fairly strong impact on overall manufacturing in terms of cost and therefore prices. I haven't seen the details of what the FM said and we did ask him this question and he responded back saying 0.41% is good number in terms of the impact it would have on the inflation. So I don't have an answer to that one, but the cascading impact is a reality.

Q: Given that inflation is already kissing 10%, do you think that the Finance Minister now would be best advised to perhaps waive the diesel hike and retain the petrol hike?

Munjal: Just post the Budget we had said it is a good idea to allow prices of fuel to become free, get market driven. However, what the FM has done is still not freed up the prices, he has just put in additional charge on these by way of additional cess on custom and excise. So it maybe well served for the moment to hold back on this maybe for a couple of months until our crops start to come in.

For complete interview watch the videos.