PMI data indicates likely uplift in corp performance: HSBC

Naina Lal Kidwai, country head for India and director at HSBC Asia Pacific tells CNBC-TV18 that the rising PMI number indicates the possibility of a likely uplift in corporate performance.

The HSBC purchasing managers index (PMI) grew to 57.5 in January from last month's 54.2, boosting sentiment amid widespread concerns about economic slowdown. However, Kidwai goes on to say that while IT services and consumer goods has shown good growth, it is the power sector that needs to see some pick up. Below is an edited transcript of her interview. Also watch the accompanying video. Q: Your HSBC PMI number has created a lot of optimism over the last couple of months, but from your vantage point are things really on the mend? A: I think the news is positive and may be expectedly so because we were all expecting a bit of an uplift in terms of the way companies are performing through this early part of the year. So the PMI index is an important one to watch. It is early days but I do expect that this is an indication that corporate performance also will begin to show positive growth. We have seen that not all corporates have suffered; there are many sectors that have continued to do well even through this downturn. We have seen IT services and consumer product companies all hold up pretty well, but it is important now that we see the infrastructure sectors, power in particular, begin to recover in the course of the year. Q: Do you think the investment cycle is turning? We have seen some small signs of recovery, but is it enough to justify to you that we put the worst behind last year? A: Too early to say because there are certain structural reforms that are required, particularly in the power sector and that is not going to happen overnight. Much has been said about coal linkages, about issues to do with the DISCOMs and all of these problems which require longer term solutions. But we must continue to work away these and I have reason to believe that these are under a very strict watch. In the meeting that we had recently in the ministry of commerce, it was evident that across older ministries they are coming together, coal, power, finance, environment to ensure that the large power projects which were stalling get back on track and this would be a very important message, it would be very important to get them on track and through that in fact if we can get all these power projects to closure and to completion we actually project that by 2014-2015 India would not be short in power. So very important to see these projects through and ensure that we can put them back on the agenda. Infrastructure too broadly beyond power to get roads which are in fact moving forward, projects like the Delhi-Mumbai corridor are really very exciting and very good to have on track. So there are bits of good news. We just need to make sure that all of this goes ahead at the right pace. Q: The PMI figure has actually shown two months of growth back to back. From the data that you are gathering, what's your sense of what kind of trajectory this recovery may take? A: I am not someone given to forecast, but it's too much to expect a sharp change because the nature of changes that we need are indeed more structural than near term. The one factor which is a little easier to manage is interest rate; I say easier in that it doesn