The government today tabled the mid-year Economic Review in the Rajya Sabha. Samiran Chakrabarty of Standard Chartered Bank says except for the government talking about inflation control from the perspective of WPI and not CPI, which fails to find a mention in the review, nothing else is new. He further gives his views on various facets of the Economic Review.
Below is the verbatim transcript of Samiran Chakrabarty's interview with Latha Venkatesh and Ekta Batra on CNBC-TV18.
Latha: I am a little confused about this title mid-year economic review when it comes after the 10th month of the fiscal getting completed. Anything you want to react to at all in the set of flashes that you may have read?
A: I do not think there is anything out of the ordinary here. This is all quite well known in the market. The only thing that you have highlighted is important which is that from government side they are still talking about inflation control from the perspective of WPI and there is no mention of CPI as yet. That is the only thing that I can see in the headline.
Ekta: Government has pegged FY14 GDP at 5 percent, the CSO came out with the target of 4.9 percent. Where would you be placed? Do you think 5 percent is achievable? Is there an upside or downside risk to that number?
A: As GDP numbers get continuously revised for two years, probably this 4.9 percent that CSO is talking about, at some point of time this number can even turn out to be above 5 percent when all the revisions are in place. So we really do not know which version of the revised number the government is projecting when it is saying 5 percent. It is broadly in the range I would say that there is a downside bias to this number, maybe a range of 4.5-5 percent is what we will see when in the May the next round of revision comes to the GDP data.
Latha: What nominal GDP number does the government normally take in the revised estimates for FY14 which it will present on Monday? When it says we have reached 4.8 percent of the GDP what is the GDP that it will take?
A: We already have the FY14 advanced estimate at current prices, at market prices.
Latha: So the CSO's advance nominal GDP will be the basis of the Budget of the revised numbers?
A: Absolutely, That has been the trend in the past.
Latha: What would be the fiscal deficit according to that if you have that in mind?
A: Our sense is that it is possible to meet the 4.8 percent number. If the entire HZL-Balco money comes in this fiscal then the government might surprise the markets by posting a number which is marginally lower than 4.8 percent.
Ekta: We have got some details from the government saying it is possible to reduce CAD to USD 50-55 billion in FY15. Most of the street was working with a sub-USD 50 billion figure for FY14. Your thoughts on that?
A: I am at USD 35 billion, so USD 50 billion is quite far off. If you just look at the numbers, we now have 10 months of trade deficit data with us which is showing USD 119 billion. If you add to it two months of another USD 20 billion of trade deficit you would go to USD 140 billion. Add to it about USD 10 billion odd of defense import we are at USD 150 billion. We generally get about USD 115 billion of services, the invisibles component. So you are at USD 35 billion for sure. I do not see how this number could be as high as USD 55 billion.
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