Tag: A Prasanna

Rupee reacting to crude, RBI may hold it at around Rs 75 against dollar: ICICI Securities PD

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A Prasanna, chief economist at ICICI Securities Primary Dealership, on Thursday, said that the rupee is reacting to crude but the dollar index needs to be looked at.

The rupee tumbled 54 paise to close at 74.98 (provisional) against the US dollar on Wednesday, October 6, as a stronger greenback against key rivals and rising crude oil prices weighed on investor sentiment. At the interbank foreign exchange market, the local currency opened at 74.63 and witnessed an intra-day high of 74.54 and a low of 74.99 against the US dollar in day trade.
The local unit finally settled at 74.98 a dollar, down 54 paise over its previous close. On Tuesday, the rupee had settled at 74.44 against the US dollar.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.41 percent higher at 94.36. Meanwhile, Brent crude futures, the global oil benchmark, declined 0.55 percent to USD 82.11 per barrel.

Also Read: A defining moment for RBI monetary policy

“The rupee is reacting to crude but you need to look at the dollar index also, the dollar is strengthening, especially Asian currencies and that’s also a big factor. Therefore, in terms of where the rupee is headed, I would say that it is completely Reserve Bank of India’s (RBI) choice,” Prasanna said, in an interview to CNBC-TV18.

“At any point of time, if RBI chooses, they can intervene and hold the levels. So, it’s up to the RBI to draw the line on the sand. I think, probably around Rs 75 (to a dollar) they will draw the line. I don’t think it’s going to be a one-day treat,” he said.

Also Read: What to expect from RBI’s Oct 8 policy? Experts gauge challenges for MPC

According to him, the rupee is likely to move in line with other peer currencies. “If other Asian currencies are also depreciating, they (RBI) do not want rupee to remain strong,” said Prasanna.

(Text input from PTI)

For the entire interview, watch the video

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FM relief package: No choice but to print money, for the govt to spend for short-term, says SPJIMR professor

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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As the coronavirus outbreak takes a toll on the economy, the central government has stepped up its efforts to tackle the impact. The Finance Minister Nirmala Sitharaman announced an economic relief package called the ‘PM Gareeb Kalyan Scheme’ of Rs 1.70 lakh crores which would include cash transfers to the poor and a whole host of measures to provide immediate relief to the poorest of the poor.

To discuss the impact of this in detail, CNBC-TV18 spoke to expert economists, statistician and money market experts.

Pronab Sen former chief statistician said, “It is a start, I think one has to accept the fact that government’s ability to reach down to the bottom of the pyramid is adequate in rural India, is practically non-existent in an urban India. But at least a beginning has been made. I think the families of a lot of these people may be taken care of. It isn’t the final solution, it isn’t the perfect solution, but at least it is the start and a good start.”

He further added, “It is difficult to say what is good and what is not, the fact of the matter is that Jan Dhan by itself is not an indication of poverty. A lot of these Jan Dhan accounts were created essentially because banks had to meet targets so complete reliance on them as a targeting framework is misplaced. One would have to use a combination of different instruments to tackle the problem.

According to Ananth Narayan, Professor of SPJIMR, “This is going to be a huge economic shock this 21-day lockdown and we don’t know what the overall cost of COVID -19 is going to be and the brunt will be faced by daily wage workers, by casual workers, by contract workers. This is going to be extremely large, businesses are going to be hurt really hard some of them might not even recover. This is coming on the back of the existing conditions when our economy was already vulnerable. Given the situation and given that we are going to see a shock I think we have no choice but to use the fiscal lever for now. ”

“Fiscal FRBM is already the history, so we have no choice but to use the fiscal lever. For the short run, we have no choice but probably print the money, for the government to spend, for the short run.”

According to economist Haseeb Drabu there is no denying that some help has been given but if you look at it from lives and livelihood, it is very important for us to save life and lives that have been impaired by the virus and also by the consequence of the lockdown. “In terms of both safety and security, the fact that you are earmarking Rs 1.70 lakh crore is a substantial amount. There will be of course question, no matter what you do on how beneficial it will be.”

However, agreeing with Sen, he said that Jan Dhan accounts is not the best way. However the fact that they have increased MGNREGA wages, have done direct transfers, is a good thing. “I would suggest that why don’t they shift the entire MGNREGA budget of Rs 61,000 crore to the DBT,” said Drabu.

A Prasanna of ICICI Sec PD said, “To the extent the cash transfers reach the extended beneficiaries at least some part of the income loss whatever they are sustaining during this lockout will get compensated, and of course we expect that once the lockout ends it trickles down into consumption at the bottom of the pyramid.”

However, it is more of subsistence kind of money which the government is giving and I am bit shocked that the amount which has been given for Jan Dhan should have at least been doubled or tripled; Rs 500 is fairly insulting if you ask me, so that is the scale they should think. “They have to double or triple this amount and probably they have to give some grants to the states for the first three months and then after three months again double this amount. The amount of money which the government should spend between the scale they should be very large. So, this just a very small start if you ask me,” said Prasanna.

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Expect MPC to maintain status quo on rates and stance, says ICICI Securities

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Reserve Bank of India’s (RBI) monetary policy decision would be out today, the last for this financial year. A Prasanna, chief economist, ICICI Securities Primary Dealership shared his expectations from the policy.

“We think that the monetary policy committee (MPC) will maintain the status quo on rates and stance, which means that the stance being accommodative and the scope for further easing is still very much there and my expectation is that RBI in the press conference will keep that hope alive.”

“At this point of time, I would expect the MPC in its statement to say that they are in a wait and watch mode because recent inflation reading has been high and next one-two readings would also continue to be high, which means that they would prefer to wait at least till the next policy before having clarity on inflation,” he said in an interview with CNBC-TV18.

On inflation, he said, “The next inflation reading for January should also be higher than 7 percent, probably slightly lower than 7.35 percent and subsequently it should come off. If you look into the next quarter, we do expect the inflation to come down but it will be a gradual process. If RBI is looking at its target of 4 percent in a very rigid manner then perhaps it will not be before second half of next financial year before we see readings in 4 percent handle. Till then it will be in the 4-6 percent range at least in the first half of next fiscal year.”

With regards to the coronavirus scare, Prasanna said, “I would think that it is definitely one downside risk to growth, which the MPC will acknowledge. The impact is much stronger in Asia than in the rest of the world or than in the US. In Asia, it does look like it is more of a supply side hit. India is outside this supply chain, therefore the direct supply side hit to India might be on the lower side but clearly sentiment is hit and there will be a slowdown in export growth. So to that extent, I don’t expect the RBI to change their growth forecast but they might flag off downside risk to those forecasts.”

In terms of Operation Twist, he noted, “At this point of time, the expectation is that maybe RBI is not going to do any more of these operations at least for quite a few weeks. So, if anything comes out of the press conference, which is different to that expectation, obviously that will have an impact. Otherwise, market is going into this policy thinking it is a status quo policy, it is more or less a non-event, so I wouldn’t expect too much of a reaction post-policy if the policy sticks to that script.”

However, if again RBI explicitly rules out some of these operations going forward then that can be negative. Conversely, again they can keep the chances of a rate cut open – if they play down these inflation rise as transient then that will be taken as very positively by the market, he added.

When asked how many more rate cuts he was factoring in for the rest of the calendar year, he replied, “We still expect one more rate cut in the next fiscal year and that is 15-25 basis points (bps). We do think that is like a residual cut or the last cut but for us it is not just the policy which matters but also growth print which matters. So, if we see that the growth recovery process is getting delayed or getting stretched out then the chances of a rate cut into the next fiscal year go up.”

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First advance GDP estimate at 5%, lowest in the new series

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Narendra Modi government on Tuesday has estimated India’s GDP growth during fiscal 2019-20 at 5 percent as compared to 6.8 percent in the year-ago period, according to the first advance estimates released by the Central Statistics Ministry.

The CNBC-TV18 survey has estimated the reading at 5.05 percent.

The decline has been mainly on account of deceleration in manufacturing sector growth, which is expected to come down to 2 per cent in 2019-20 from 6.2 per cent in the year-ago fiscal.

According to the government data, the sectors which registered growth rate of over 4.9 percent are, ‘electricity, gas, water supply and other utility services’, ‘trade, hotels, transport, communication and services related to broadcasting’, ‘financial, real estate and professional services’ and ‘public administration, defence and other services’ at 5.4 percent, 5.9 percent, 6.4 percent, 9.1 percent respectively.

The sectors which registered growth rate below 3 percent are ‘agriculture, forestry and fishing’, ‘mining and quarrying’, ‘manufacturing’ and ‘construction’ is estimated to be 2.8 percent, 1.5 percent, 2.0 percent and 3.2 percent respectively, the government said.

Manufacturing

GVA at Basic Prices for 2019-20 from ‘Manufacturing’ sector is estimated to grow by 2.0 percent as compared to growth of 6.9 percent in 2018-19.

Agriculture, Forestry and Fishing

GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and Fishing’ sector is estimated to grow by 2.8 percent as compared to growth of 2.9 percent in 2018-19.

Mining and Quarrying

GVA at Basic Prices for 2019-20 from ‘Mining and Quarrying’ sector is estimated to grow by 1.5 percent as compared to growth of 1.3 percent in 2018-19.

Electricity, Gas, Water Supply and Other Utility Services

GVA at Basic Prices for 2019-20 from ‘Electricity, Gas, Water Supply and Other Utility Services’ sector is expected to grow by 5.4 percent as compared to growth of 7.0 percent in 2018-19.

Construction

GVA at Basic Prices for 2019-20 from ‘Construction’ sector is expected to grow by 3.2 percent as compared to growth of 8.7 percent in 2018-19.

Trade, Hotels and Transport & Communication and Services related to Broadcasting

The estimated growth in GVA for the Trade, Hotels, Transport and Communication and Services related to Broadcasting services during 2019-20 is placed at 5.9 percent as against growth of 6.9 percent in the previous year.

Financial, Real Estate and Professional Services

The estimated growth in GVA for this sector during 2019-20 is placed at 6.4 percent as compared to growth of 7.4 percent in 2018-19.

Public Administration and Defence and Other Services

GVA at Basic Prices for 2019-20 from this sector is expected to grow by 9.1 percent as compared to growth of 8.6 percent in 2018-19.

A Prasanna, the chief economist at I-Sec PD, said, “Our estimate was 5.1 percent. However, 5 percent is within the range of estimates one would have expected. Obviously, they are working with a limited set of data, so this should just be considered as the first guess for this year.”

Indranil Pan, the chief economist at IDFC First Bank, said, “In terms of our own estimates, we are bang on and therefore I do not have a problem in terms of the numbers that have come out.”

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GDP data today: A Prasanna of ICICI Securities expects growth at 4.7%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A Prasanna, chief economist, ICICI Securities-Primary Dealership, is expecting the GDP growth at 4.7 percent for the second quarter. He said the number was arrived at after taking into consideration the strong government spending in the second quarter. The number, he said, could be even lower in the absence of government spending.

He acknowledged that there were reports that the number could even be 4 percent.

“If you look at high-frequency indicators pertaining to the private sector, even we were getting a number closer to 4 percent, but second quarter’s government spending — both the central and state governments… the spending growth was very strong. Therefore, taking that into account, we arrived at 4.7 percent,” said Prasanna in an interview with CNBC-TV18.

The GDP data will be released later today. A CNBC-TV18 poll pegs growth for the second quarter at 4.64 percent versus 5 percent in the previous quarter.

Talking about the expectations over the growth numbers, Prasanna further said that their estimates could also stand at 4.7 percent with a downward bias.

“Of course there is a bit of uncertainty… how the government’s spending translates to GVA… definitely there is a bit of a gap in our understanding and that leads to uncertainty. Therefore, its 4.7 percent with a downward bias,” added Prasanna.

Talking about monetary policy, he said, “Any number which is going to print below 5 percent (GDP growth) would mean that it’s well below RBI’s own estimate for the quarter and accordingly, they will have to revise down full year’s estimate also which should lead to a rate cut. So our base case is 25 bps rate cut.”

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Monetary policies not enough for economic recovery, says A Prasanna of ICICI Sec-PD

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Reserve Bank of India’s monetary policy report showed a bunch of negative data points like capacity utilisation sliding down to 73 percent from 76 percent and consumer confidence index slipping to 89 from 95.

However, the worst was the credit flow to the commercial sector from the banks — non-agriculture sector for the period between April and September — it is minus Rs 1.28 lakh crore compared to plus Rs 1.85 lakh crore in 2018 (April-September). The non-bank credit fell from Rs 5.51 lakh crore to Rs 2.19 lakh crore. Therefore the total credit flow fell from plus Rs 7.36 lakh crore to Rs 0.90 lakh crore.

A Prasanna, chief economist, ICICI Securities Primary Dealership, discussed the implications of the decline in credit flow and the impact it could have, in an interview with CNBC-TV8.

He said that some of the slowdown was already seen in the data — the first quarter gross domestic product (GDP) numbers and in Q2 as well in terms of high frequency data we are not going to see any kind of improvement. So a lot of that slowdown is already in the data and that is the why the growth projections were slashed.

It is possible that there is further downside risk to growth, said Prasanna.
“This year in stark reality it has shown ineffectiveness of monetary policy in India because there are so many issues in the financial sector in terms of solvency particularly in non-banking space and banks have become more risk-averse as a reaction to that,” he said, adding: “So trying to use monetary policy to engine the recovery is going to be like pushing on a string. I think fiscal policy has to play a role.”

It is about time the government made up its mind and come forward and if there is going to be a fiscal expansion, it is better to announce it and see how it can be funded, he said. “So till the time we get clarity on fiscal policy one should temper hopes of recovery,” he added.

Prasanna said that 4 percent fiscal deficit number for the Centre and 3 percent for states would be bearable number.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow