SENSEX NIFTY
Apr 12, 2013, 01.58 PM IST | Source: CNBC-TV18

Can't cheer Feb IIP, but recovery on anvil: Credit Suisse

IIP numbers for the month of February stood on a better than expected mark, at 0.6 percent. It outperformed CNBC-TV18 poll, which had an estimate of negative 1.7 percent. However, Robert Prior-Wandesforde, Credit Suisse sees this positivity as a quite sad part.

February industrial output numbers came in better-than-expected at 0.6 percent , outperforming CNBC-TV18 poll, which had estimate it at negative 1.7 percent. However, Robert Prior-Wandesforde, Credit Suisse says that cheer around 0.6 percent year-on-year number reflects low expectations.

Talking on global economy, he believes it is weak, but India is much more competitive than it was. "I think India is beginning to take back some of the lost market share it had", he added.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: How have you read this IIP print of 0.6 percent for the month of February, given that it is largely led by the capital goods which has risen 9.5 percent and is noted to be extremely volatile?

A: I would take it in slightly more positive line than some of the other guests. It is certainly quite sad that we see a 0.6 percent year on year number as good. It tells how far expectations have dropped.

If we dive a little bit deeper into what this number means, on a month on month basis, we think it implies 2 percent increase month on month seasonally adjusted after about 1.5 percent increase in the previous month. So, little bit of momentum there.

Yes, capital goods are volatile. It wasn’t an easy base comparison at all. So, to get that number was doubly good. Fundamentally, it seems to me that there are good reasons to believe that recovery is going to come through and that will involve investments.

Cash realisation is not a lead indicator of capital spending. Interest rates have come down, the exchange rates have depreciated, exports are starting to recover and we have some good news relative to expectations on reform. So, there are a few bits and pieces out there, which I think will drive recovery.

Q: What do you make of the March numbers then because the PMI numbers again showed falls? Do you think we will build on this? March numbers across the globe were very bad. Would you extrapolate that March will also show recovery in India?

A: The PMI numbers, the relationship with industrial production is poor. It doesn’t necessarily tell us anything. Of course, it maybe tells us that the industrial production numbers are poor. We don’t know which is better, but I think at the end of the day, we got to take a step back and think about the fundamentals.

Although the global economy is weak and second quarter will see the US slowdown quite a lot, the fact is that India is much more competitive than it was. It does take a long time for currency effects to come through. They are going to come through. I think India is beginning to take back some of the lost market share it had.

Interest rate environment is turning from a huge negative to a small positive. Fiscal policy had been a huge negative in the second half of the last fiscal year. It is turning to be neutral. So, there are number of things there on which one really needs to be cautiously optimistic on.

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