No signs of biz cycle indicator bottoming out: BluFin

In an interview to CNBC-TV18, Debopam Chaudhuri of BluFin says that June reading of the BCI suggests that the economy is still shrinking. On the positive side, however, yearly growth is still in the positive, indicating the economy is moving towards the stronger path. “We can definitely say that India is still in a deep slowdown but the intensity of the slowdown is seen to be moderating to a certain extent,” said Chaudhuri.

But it terms of the business cycle, he says that there is still some way to go before it bottoms out.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee.

Q: Take us through the July reading and how it should be seen in the context of what we have seen in May and June?

A: The July reading for BCI has been a -0.5% compared to the June reading which suggests that the economy is still shrinking. However, we are encouraged to note that the year on year growth rate, which is better way of looking at this number because it takes care of seasonal effects, is still in the positive.

The year on year growth rate seen in July is 1.9% and this was 1.3% in May and 1.8% in June. So you definitely see that the year on year growth rate for the Indian economy is moving towards the stronger path. If you collate these two numbers, we can definitely say that India is still in a deep slowdown but the intensity of the slowdown is seen to be moderating to a certain extent.

Q: Would you go as far as to say that we have seen the first sign of bottoming out of the business cycle or would you need to see more evidence to conclude that?

A: This is definitely not a bottoming out because if you look at the historical numbers, IIP’s average growth rate is somewhere around 6.8% and BCI’s average growth rate is somewhere around 6%. The growth rate we are seeing right now is 1.9%, so it’s a long way to go still. But, things are moving towards that goal so there can be a bottoming out soon.