Economy already showing signs of recovery: Kamath
After a week of suffering very dismal news in Davos where the World Economic Forum (WEF) ,et, one came back with the sense that there was little hope that 2009 will bring any positive news to the global economy because of which India will continue to suffer.
However, that one voice that is always more optimist than those of others is that of KV Kamath, President of CII and MD and CEO of ICICI Bank. He believes that there are signs of a recovery already. India is not hurt as much as most of the economies around the world are, Kamath says.
Kamath says that the growth consensus is between 6 per cent and 7 per cent7.5per cent for a year ahead and believes that 7.5 per cent number is also doable.
Kamath is of the view that the impact of global factors on India will not be very significant. According to him, India is not in need of a fiscal stimulus package but textiles, export industries, particularly in the small and medium enterprise (SME) sector, are in need of a helping hand urgently.
"To me, that is more than a fiscal stimulus, it would be direct injection of support in whatever form, a subsidy or otherwise."
Here is a verbatim transcript of the exclusive interview with KV Kamath on CNBC-TV18. Also watch the accompanying video.
CNBC TV18: I think that will be the one biggest statement anyone has heard this month that is you actually believe that there are signs of a soft landing for India or a recovery for India already in sight.
KV Kamath: Indeed; if you look at what others said: consensus is between growth of maybe 6% to 7%7.5% for looking a year ahead. I believe that 7.5% number is doable. So India is not hurt as much as most of the economies around the world are.
How do I say that we will be at the upper end of this number? I think it is based on a dipstick survey amongst the CII CEOs. This was at the last National Council Meeting when we had about 45 out of 50 CEOs present. These same CEOs in November had no confidence at all that we would be up and doing things that we are doing today.
Same was the story in October whereas the same set of CEOs in July was extremely bullish. I am not saying that their confidence level just now is what it was in July but it certainly is quite different from what it was in November and I can explain this in more details as we go ahead.
CNBC TV18: You are saying 7.5% based on the positive comments that you are getting from CII manufacturers but the same industry leaders when we speak to them are asking for fiscal stimulus packages.
They are saying that earnings will continue to deteriorate, so on what basis do you believe that we are actually going to see a turnaround happened in the next two-three months?
KV Kamath: The steel industry was seeing no pick-up of stocks from the yard at all during most part of the last quarter. Today, that industry is back to full capacity production.
I am taking that as one basic mother industry, which actually feeds other industries. The same is the story with cement, you then go on to motorcycles back at almost full capacity; you go to commercial vehicles, which is hurting badly; cars somewhere in between, so you have a sketchy sort of situation.
Let us see what sectors are doing well. Rural India continues to do well and that is 45% of the economy; you then have FMCG still doing well growing at 15-20% not 20-25%; knowledge areas i.e. services sector not growing at 20-25% again growing at 15-20%.
So the areas which are truly hurting now could be commercial vehicles, textiles, auto ancillaries and some areas of downstream oil where adjustment process is going on.
So if you take weight of all these things that I have talked about, you probably see about 75-80% of India back on track. Nothing stops us from doing the infrastructure investment that we need to do that will happen; inflationary numbers are now looked at as probably 0% to 2%; interest rates probably set to fall another 1-2%.
To me that is hugely positive along with opportunity in infrastructure and the fact that most of these sectors that I have talked about are coming back to normal except for maybe 20% and that is where I say you do a weighting of all these things and you are looking at numbers back to 7-7.5%.
I will possibly then try to pitch too my past record I have had in this is always being more optimistic than the others and probably being right over the last 10 years or so.
CNBC TV18: So you are saying that this the last quarter of pain this January to March quarter and that starting the next quarter in the beginning of the next fiscal earnings will start bouncing back?
KV Kamath: Yes. If you look at corporate India, they have had quarter-on-quarter (QoQ) growth of more than 20% for almost 18 quarters and this is the first quarter where we are all probably looking at a 15% deceleration in that growth and that was a quarter when oil corrected by 66%, most of the commodities corrected by 66%.
Every company which was right in it got all their raw materials, all their work in process and finished good re-priced. So to me probably the worst hit was the quarter ending December, maybe some more hit in this quarter and then we should be back into a clearer territory with inflation down to near 0%, all output prices redone as it were because of input cost going down and interest rates coming down.
CNBC TV18: Do you believe that this is irrespective of what happens in the global economy because I know that the prognosis for the global economy in 2009? I am sure you have heard that as well while you were in Davos, was incredibly dismal. Everyone believed that 2009 would be if not as difficult an even more difficult year than 2008?
KV Kamath: I entirely agree with you on that part. The global scenario as seen through the lens of global entrepreneurs, global bankers or global thought leaders is really dismal. How much would it impact us? Yes, it will impact us to the extent we export but to the extent we import, we are going to get things much cheaper than we did. So it will have an impact but that impact I am factoring into that 20% which is of our growth which is impacted, the rest 80% should do well.
Economy already showing signs of recovery: Kamath
Or at least thats what they say! 
