Aziz does not feel there will be a sharp upturn in momentum in IIP numbers. CNBC-TV18 poll points to May IIP at 1.5%; CPI at 9.2%. He further added that the July numbers will probably pick up the impact of rupee depreciation rather than the June numbers. "So most likely in the August print, we will probably see the full force of the impact of the depreciation on CPI and WPI," Aziz said.
He says the Balance of Payments scene has definitely worsened and it is not just the global markets that is responsible for it. The silence of the monetary authorities in preventing the rupee from free falling has played a big role in forming expectations and the market right now is being driven by people's expectation of the rupee.
Also Read: May IIP seen at 1.5%; CPI at 9.2%: CNBC-TV18 Poll
Below is the verbatim transcript of Jahangir Aziz's interview on CNBC-TV18
Q: Are you expecting any kind of a pick up in industrial growth parameters or do you expect them to continue to languish at fairly lower levels?
A: My sense is that if you look at the Purchasing Managers' Index (PMI) numbers, they all point to an actual sum pickup but I don't really think that is going to be anything exciting. My guess is that it remains range bound. The new export order numbers were encouraging but beyond that the new order numbers actually fell. So my sense is that you are probably going to see same kind of story being repeated and in this environment that is a good thing.
Q: Are people primed for today's disappointment because that is the expectation coming off a high base, etc, there isn't going to be that much traction in the Index of Industrial Production (IIP) figure today?
A: Yes these base effects etc will always play a role in it but we need to focus on what is the momentum in the IIP numbers. The momentum is not going to sharply turn up simply because we know more or less that the PMI numbers did not report any sharp upturn in the momentum in IIP.
Q: The bigger worry is what may come through on consumer price index (CPI) and generally the trend that inflation is beginning to take now?
A: Depreciation was a shock. It will get transmitted into prices. The question is when does it get transmitted, does it get transmitted immediately or does it take about a couple of months, I am looking more at the July numbers to pick up the impact of the depreciation rather than the June numbers. So most likely in the August print that is when we will probably see full force of the impact of the deprecation on CPI and WPI.
Q: Are you expecting any meaningful relief for the rupee from the deficit numbers which come out over the next few weeks or do you think funding this deficit would still be a fairly significant challenge and that would keep the rupee close to that Rs 60 mark in the foreseeable future?
A: Someone has to put a line in this side. Unfortunately the authorities haven't put a line on this side. So in the absence of any actual line in the side it is left to the market to decide whether the rupee depreciation is overdone or not. So right now we are in a world in which expectations are driving what is going to happen to the rupee.
We all knew going into the year that the current account numbers were going to be bad, USD 85-90 billion for the year as a whole. What we did not know as we also had capital account problem in terms of outflows. So the situation as far as the balance of payments are concerned has worsened and I will say look we can blame the global environment as much as we want to but the silence of the monetary authorities in doing something to prevent the rupee from free falling, that clearly has played a big role in forming expectations and the market right now is essentially being driven by what your and mine and everybody else's expectation of the rupee is.
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