Too early to go for number upgrades - Economist Siddharth Shankar, Kassa Financial Services

ET Now: You said 7.9% is a decent number, what do you read between the lines, which part of the break up do you like the best?

SS: Well I do not have the figures right now but broadly looking at 7.9% it is really what was expected according to me because see the IIP numbers, manufacturing numbers, the car sale numbers, the amount of private consumption expenditure numbers that we have been seeing over the last three months , the amount of buoyancy that is there in the market I think it is really nice. I would like to look at the figures of how the services sector has performed before I can really take a call on the GDP numbers but as far as the manufacturing and IIP numbers were concerned I think this was an expected number.

 

ET Now: We are talking about the mining index and that's one that seen good activity the manufacturing side as well coming in fairly strong, how do you see this picture playing out now so now the second quarter is behind us, how do you see the picture now playing out for the months of October-November and December?

SS: I think the impact of agriculture towards making the whole GDP numbers spiralling a little downwards would be seen in this third and the fourth quarter. So I should see a negative kind of impact because of agriculture on the GDP numbers in the coming two quarters that is the third and the fourth quarter. Looking at the manufacturing side I think we should go little flattish, the consumption expenditure if you look at the expenditure side I think again we would be little flattish in the third and the fourth quarters because fourth quarter is I would look at the liquidity being tightening a little bit by the RBI so we should see little moderation in the GDP growth in the third and fourth quarter numbers.

ET Now: What is your view, do you agree that it is going to be the services sector that have probably grow now because October numbers on the manufacturing side have coming a little soft?

SS: I think so services sector is the thing that will go forward now but I think I like to add two more things that once we are comparing the figures from the second quarter of last year to this year I think the base effect needs to be taken into account and the second thing that is important when we look at the future figures of Q3 and Q4 would be the level of inflation and the corresponding disposable income that would be available to the people so I would not look at the industrial growth that we have seen in the second quarter continuing in the third and the fourth quarter. But services sector yes definitely it will play an important role in the overall GDP numbers in the coming two quarters.

ET Now: Sure, Siddharth your view GDP estimate now is there a case for revision upwards even though agriculture might be a little put a spanner in the works, we have already seen momentum coming in very strongly across the rest of the economy?

SS: I think I would not still revise the GDP estimates upwards for the entire year because we are still to see how the winter rains play their role now because that is going to impact the crop that is coming in the second and the third quarter. Second as I said the inflation would impact the amount of disposable income available to the consumers so the disposable income might go down. So I think the GDP numbers should not be revised as of now till we see the third quarter GDP numbers for the overall year.

ET Now: One more point for you, markets are looking extremely excited about this number, we have got Mr. Montek Singh Ahluwalia also saying that it is time not revises numbers upwards, why are you still maintaining such a negative, you know not a negative view but why so much hesitation as yet to talk about upgrades?

SS: There were few factors that are forcing me not to revise the number upwards firstly would be the agricultural production that we would see in the third and the fourth quarter because of which we should see a lower kind of disposable income and had inflation rate which would again result in a lower disposable income which would directly impact the industry.

(This story is from a program Markets Now on ET Now, which came on 30th November, 2009. Economist Siddharth Shankar, shared his expertise and views on Economy with the ET Now team. Excerpt from the interview is as above)

Economist Siddharth Shankar on NDTV - Hum Log

Dear Readers,
To watch Economist Siddharth Shankar on NDTV - Hum Log, please click on the following Link. The topic of discussion was Cell Phones vs Pulses




Link for the video
NDTV Hum Log

Siddharth Shankar in NDTV - Hum Log

Dear Readers,
NDTV - Hum Log came up with the issue of Inflation on this sunday 15-November-2009 and the topic of dissusion was "Mobile v/s Moong Ki Daal". Mr Siddharth Shankar have been the only Prime Economist on the panel to discuss the issues related to common man with the perception of an economist and presented suitable measures to cop-up with this issue.

We will soon upload the video details of the show here.

For further updates keep reading...

Inflation and IIP number

Friday, November, 13, 2009: The IIP numbers coming down somewhat was something that was expected and I see it coming down further in the coming months, barring a few exceptions. The growth of capital goods is due to the liquidity that the government pumped in by way of pay commission and other stimulus measures. Sustained and stable industrial growth does not happen when the consumer level inflation is in the range of 15% or when you get peas at Rs 80 a kg. Car sale figures are not representative of industrial revival it merely shows that banks are desperate to lend and they consider lending against an asset called automobile to very safe, I think banks would do much good to India if they start lending to small enterprises on merits. It will solve many direct and indirect problems.
I disagree with economists who want to revise the numbers upwards in the coming months. The weakness of the dollar, the way Yuan is moving against the dollar, US unemployment figures etc point to a poor export growth scenario in the coming months. The numbers that we are seeing are due to the excess liquidity of the west that is pouring into India, the ground reality is that the feel good factor is due to this free money from the west, which can be called back anytime, it is their money not ours; we must keep this in mind. We have to be cautious and optimistic together. The growth that we are seeing is because of the feel good factor that is due to availability of easy capital. Fundamentals of economics point towards something quite different.

The base effect will start coming into play from Jan 2010 onwards and we must keep that in mind. I would like that RBI monitors the lending of the banks. Fundamental growth does not come by selling cars; in India it will come when the small enterprises flourish when agricultural production per unit land area increases. On the side of the government they will need to ensure that inflation is kept under check, else the social problems will surpass the economic issues and it would be something that cannot be tackled by either monetary or economic policy.

What's Spooking the Stock Market

[Note : As appeared in Mail Today, 30-Oct-2009]

Inflation Figures

The inflation figures released today are quite realistic in nature and have confirmed the fears that I have been citing for such a long time. I still differ from the planning commission that food prices will moderate in the coming weeks, it cannot- people do not change food habits so fast. Government will need to look at supply side constraints to contain prices; it is as simple as that. Depending on any kind of monetary policy to contain inflation would be a mistake. The higher food prices will hamper the recovery of the economy in a big way. While the RBI has indicated of higher interest rate regime in the coming months, it would not be enough to contain inflation. It may be counter productive, in the sense that it will further slow down the process of recovery with not much impact on consumer level inflation. We are in a tight and critical situation and each step must be carefully thought off before being executed.

[Note: According to the figures of 5-Nov-2009]

Economic Note - Economist Siddharth Shankar

While the figures of car sales, real estate prices and the stock market indices may all signal that things have bottomed out, I’am still not convinced that we are out of the bad phase. I expect that unemployment in India would continue to rise; coupled with this increased unemployment would be high inflation that would translate into social problems very soon. We have already seen inland security is becoming a major problem and a major cause of that is the un-employed youth, we cannot fight it by force, it can only be countered by providing employment to the youth and by way of educating them. I think the government must focus on this larger socio-economic issue rather than bothering too much about short term economic recovery.

I still do not see manufacturing or service sectors picking up in the near term. A much bigger problem will come in how to ensure that small business are able to sustain themselves in the coming one year. Government and the central bank have to look at sustaining the small businesses for overall stability of the Indian economy. The industry on its part will have to act with maturity and ensure that they do not push up the wages as it would lead to wage push inflation.

[Note: As said by Economist Siddharth Shankar on - 7-Nov-09]

Impact of Inflation

Looking at the figures released yesterday the inflation has maintained an upward tick. While the upward move was statistically expected the worrying part is the build of inflation this fiscal that is around 6% and which is higher than last year. If we look at the components, the numbers worry me more because the inflation has been higher because of basic items like tea, pulses, spices etc. If we exclude the drop in prices of items like aviation turbine fuel and light diesel oil the inflation figures would become more worrisome. If the current trend continues we would land up at an annual figure of between 8-10% that would translate into 20% inflation at the consumer level. Looking at the trend I think the government has to become more proactive to control inflation than RBI.

Indian State of Economy

The possibility of the Indian economy showing positive signs in the 2nd quarter of the current fiscal are quite high, I expect this number to be good in view of the government stimulus that has helped lift consumer spending. Growth may not be very broad based, with gains mainly coming in the in consumer spending. I do not see much support coming in from exports. One would need to look at the numbers minus the auto numbers; one should look at figures that can give a fair idea of consumer spending, real estate investment, inventory and most importantly the inflation and agricultural output to come to any conclusion about the state of the economy.