Moneycontrol Bureau
If the rally in Capital Goods sector is anything to go buy, the Index of Industrial Production (IIP) numbers for May is expected to be better than April. A CNBC-TV18 poll pegs May IIP at 4.4 percent, higher than 4.1 percent seen in the preceding month. An IIP number of 4.4 percent would be positive for the coming days against the 0.1 percent recorded throughout last year.
But two eminent economists —Jahangir Aziz of JP Morgan and Indranil Sengupta of BoFA-ML remain cautiously optimistic of IIP result in May.Voicing his opinion, Jahangir Aziz says there is a faint hint of a pick up in the capital component of manufacturing. He noticed that infrastructure, which is the biggest part of manufacturing component in the IIP basket, is seeing steady improvement in the form of new project announcements. This has come after a very very long time, he told CNBC-TV18 in an interview. However, Aziz does not see an "alarming turnaround" in the May IIP number.
Indranil Sengupta, chief economist (India) BoFA-ML is not very optimistic. He agrees the economy is undergoing a slow and gradual recovery but sees May IIP at 2.8 percent, well below consensus.
Speaking of GDP, Aziz said monsoon and corporate results in the final quarter of this fiscal remain two big uncertainities. He said the GDP could see an upside in the 7.2 percent to 7.5 percent range subject to monsoon. However, the extent of fiscal compression by government in Q4FY16 to meet fiscal target remains a key factor. Sengupta too projects FY16 GDP at 7.5 percent.
Aziz expects inflation to continue its downward trajectory with CPI touching the 4 percent mark in August. After that there is a liklihood of a move-up again. He says if transportation element is taken out then it is evident that inflation remainde stuck at around 5.5 percent for the last 4-5 months. On the other hand, Sengupta talks about retail inflation in the more immediate term. He sees June CPI at 5.4 percent and WPI at -2.4 percent.
Asked if the macro data will enthuse Reserve Bank (RBI) in announcing a rate cut, Aziz replied in the negative. Given the significant amount of global uncertainties, the real chance of rate cut will come if August-September inflation print comes closer to 3 percent, he said. The RBI is targeting inflation below 6 percent by January 2016 and 4 percent by 2017.
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