Economic review 2012-13: Mkt doesn't care, says Tandon

The Prime Minister's Economic Advisory Council (PMEAC) came out with the economic review for 2012-13 on Tuesday. Commenting on the report, Anand Tandon of JRG Securities says it will not make a difference to the market. One shouldn’t worry too much whether the number is a surprise or disappointment because it does not really matter

With regards to gold prices he says, they seem to be driven more by Central Bank action than real demand-supply gap. Also read: Rangarajan presents FY13 report card, sees FY14 GDP at 6.4% He cautions that one should look at gold as an investment rather than a consumption item. “A lower gold price actually sets of negative wealth effect which will drive consumption down and that is not good for any economy which is already slowing down,” he adds Below is the verbatim transcript of his interview on CNBC-TV18 Q: Does the stock market care for the economic review 2012-13 numbers? A: No, I don’t think so because any economic number, especially when it is a forecast you have to take it with a pinch of salt. If it is coming from the government it has to be necessarily bullish. Most analysts find it very difficult to mark down a number from where it is. So by default the number will be higher than what was there last year. One will have to keep on making changes and I just mentioned the assumptions as you go along. Q: Is the market surprised by any of the numbers which have been announced? A: If you don't worry too much about it whether it is a surprise or disappointment it doesn’t really matter. It is a profession of economists and many of us to make comment on it but if you ask me whether it will make a difference to the market then the answer is I don’t think so. Q: Will all these numbers count in the final analysis to flows remaining as strong in FY14? A: The key thing is whether capital account deficit is an issue at all; will it put pressure on the rupee? My contention is that in the scenario where every country seems to be into competitive revaluation whether you want to call it Quantitative Easing (QE) or any other word that is really what it is. Automatically, the fear should be on the other side that you should be looking to push down if you want to push up exports because the demand outlook is weak everywhere in the world. If you are looking to export then you need to export to Mars now because there aren’t enough places in the world to be able to export. Other thing is obviously oil prices seem to be little weaker now and therefore to that extent capital account will automatically come down. I am not so sure of the gold factor though. There seems to be real fear that there is more central bank action driving gold prices than real demand-supply gap. More importantly, I would tend to believe that we should not be looking at gold as a consumption item. It is really an investment item and it is telling us that the Indian consumer wants to keep investing overseas because he does not get adequate returns from investments in India. We are completely wrong if we are looking at gold as a consumption item. So from that point of view a lower gold price, actually sets of negative wealth effect which will drive consumption down which is not good for any economy which is already slowing down, and where the investment climate is poor and the consumption outlook is becoming poorer.