INSUBCONTINENT EXCLUSIVE:
Growth engines are cranking up, finally
Data released by the Reserve Bank of India shows that capacity utilisation by domestic companies rose to over 75% in the March quarter, the
highest in the past two years.
Experts say this is a clear sign of a pickup in economic activity, and it will have a big positive impact on
the profitability of companies
Demand revival is sure to encourage corporates to dust off their expansion plans, as indicated by the pick-up in bank credit growth.
Higher
capacity utilisation also means India Inc getting its pricing power back
Although the firming up of prices will have a recoil effect on inflation, the impact will be negligible if growth picks up pace.
The Met
Department’s forecast of a normal monsoon and the government’s focus on big-ticket infrastructure projects are the other big positives
that could push the economy into a highgrowth trajectory.
So are these early signs pointers to a revival in the investment cycle What will
be the impact of high input costs on the demand situation Also, will high interest rates spoil the party
On ET NOW’s India Development
Debate, economists and banking experts discussed the revival in the capex cycle
Here are the highlights:
MS UNNIKRISHNANMD CEO, THERMAXWe are almost closer to an investment cycle starting
How strong it’s going to be is anybody’s guess
It’s going to be selective going forward
Despite all the negatives in steel, it will start investing
I am expecting oil and gas to pick up
It’s not going to be all industries moving together
Core sectors will start investing
We are not an isolated society
We are going to take the global and domestic capacity building.
ARUN NANDACHAIRMAN, MAHINDRA LIFESPACE
I would say these are early days
I don’t want to be pessimistic
There are industries where we have seen significant growth
RBI has picked figures from 10 large industries
I request the ministry to consider giving fillip to our ancillary suppliers who have no access to funds
We are seeing some positives but when election is round the corner people want to wait
Unless there is a strong push from RBI and government I see problems for MSMEs but not for large corporates.
MYTHILI BHUSNURMATHCONSULTING
EDITOR, ET NOW
Corporate earnings haven’t done too badly
If you look at the microlevel, data corporate earnings have held out quite well but at the macro level we don’t see too many signs of a
The economy is recovering but I would be a little hesitant to say we are clearly at the inflection point and from here it’s clearly
Remember, the IMF has lowered our growth rate from 7.4% to 7.3%.
ANANTH NARAYANMONEY MARKET EXPERT
The last two years haven’t been great
To say that this is the best that we have seen in the last two years isn’t under a great frame of reference
There’s a seasonality involved: we do see a spike up in the fourth quarter numbers every year since 2011
But growth or incipient growth doesn’t necessarily mean things are fine
Between 2009 and2013 capacity utilisation was consistently above 80% in the last quarter
As things stand right now while GST is stabilising, formalisation of the economy etc
is going to give us a fillip
There are vulnerabilities we cannot deny.
