There is no room for complacency or jubilation despite the rating upgrade provided by Moodys’ Investor Services, given the many challenges that still remain to be addressed on the Indian macro-economic front, Ajit Ranade, Chief Economist of the Aditya Birla group said today.
He was speaking at the Almus 4th Annual conference on ‘Reset Corporate Treasury’, hosted by Almus Risk Consulting. While the view from outside is sanguine, there are many concerns that are visible. For instance, Bank credit growth is at 6% which is a 60 year low, while fixed capital formation has been low and job losses have been increasing.
Exports growth and reviving industrial manufacturing will be the key to lifting the economy from its current state, he said. Industrial growth is expected to move up to 4% next year but it has to go to 10% and that can’t happen without exports growing at 15%. “Exports growth is the thermometer that tells you if the economy is picking up, ” he said.
Speaking to a gathering of corporate treasury heads and dealers, Ranade cautioned them about the rising risk levels in different parts of the economy. Oil prices have gone up 40 per cent in six months from about 43 dollars a barrel in June to about 63 dollars currently. There are expectations that it may reach 70 dollars a barrel and that would have an impact on the inflationary situation and on the fiscal deficit. Imports have grown recently at nearly 40% and this was not on account of oil or gold but manufactured goods. Current account deficit had moved up and it was no longer in the very comfortable zone.
Besides, he pointed out, if banks are reluctant to extend credit but the bond market is booming, then one has to look at whether the risk has shifted to the bond market? ‘You need to be vigilant and not let risk out of sight’, he said, even as mixed signals come from various directions and corporates need to sift through the noise.
via No room for complacency on Moodys’ Rating, says Ajit Ranade | Business Line
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