Indian economy looks strong ahead: Suresh Mahadevan, UBS Securities

Suresh Mahadevan, Head Of Reasearch, UBS Securities comments on the just out IIP numbers and the reactions played out in the market, in an interaction with ET Now.


IIP numbers at 11.5% is much below the expectations of 16.1% that was the figure for the ET Now poll and that was the kind of number that we were expecting. If you could just give us your initial reaction to the kind of figures that we are seeing because the markets do not really seem to be digesting this news too well?

Suresh Mahadevan: See our economists have somewhat kind of used this lead economic indicator and predicted that IIP numbers should be become a little bit soft, but it’s not something we worry about because we still forecast I think 9% economic growth rate for FY11.

So in my sense, there might be some amount of seasonality, but clearly I think the loud and clear message our economists are sending is the economic recovery after the cyclical slowdown was pretty strong. I think our outlook as I said is 9% GDP growth rate. So we are not unduly worried about this at all.

You mentioned the seasonality factor. Clearly some of that would be playing out so that was expected to perhaps play out a little bit later. Also the fact that the figure for April, as you said a figure of 11%, is nothing to scoff at because these are still very strong growth numbers. But would you be worried about some of that momentum slowing down, is that your expectations?

Suresh Mahadevan: No, as I said we are still expecting a fairly good and robust economic growth. So some amount of seasonality is bound to happen. As I said we are not too worried since the numbers just came out I have not been able to speak to our economist but he would have a better grip on some of the minute details. But my sense is broadly we are not unduly worried about our economic forecast or even our bottom up earnings forecast at this point.

With respect to the IMF that recently upgraded the Indian GDP estimates to 9.4%, how much of a contribution do you believe this had to the kind of IIP numbers that we are seeing?

Suresh Mahadevan: As I said our GDP forecast is around 9% and I understand IMF has come out with a little bit more bullish forecast. But whether it is 9% or 9.4%, the key is India is going to go through a phase where economic growth is going to be strong. So that is pretty much the case and whether it is 9% or 9.4% really does not matter. My sense is assuming we have a normal monsoon which looks like things should be fine. There is nothing much to worry about in my view.