IPO LIC: GDP estimates on expected lines: Saugata Bhattacharya

Saugata Bhattacharya, Chief Economist, Axis Bank, says GDP estimates are in line with expectations. “But there are currently multiple uncertainties due to the consequences of Omicron on public health. Supply bottlenecks are likely to persist for a long period of time,” he said in this interview with AND Now. Edited excerpts:

GVA growth is projected at 8.6% for fiscal 22. How does that compare to the numbers you’re looking at?

The GDP figures are accurate compared to what we expected. With Omicron and a worldwide increase in Covid cases, the number of GVA is slightly higher than expected. We expected 8.3% and now estimate it at 8.6%. Real economic activity is therefore seen as slightly more robust than we expected. It is generally in the same direction. Our estimate of nominal growth for FY22 is 17.2%, so the government will have some leeway in terms of the budget deficit figures. It will be interesting to see which segment is considered to have contributed or contributed to the slowdown. But there are many uncertainties at the moment due to the consequences for Omicron’s public health. Supply bottlenecks are likely to persist for a long time. We saw an increase in potato chip shortages in December, which is likely to keep inflation boiling.

Do you think the government will have a huge hole in divestment or will the IPO of LIC be successful?

This is something that people, even at the political level, will be relatively uncertain about. The government has already announced that the sale will be postponed until next year and given all the uncertainties in the global financial scene due to Covid and other factors, in particular the looming Fed key rate hike, even a gigantic IPO like that of LIC could be difficult to cross.

Revenue collection will be relatively robust. LIC’s IPO is coming this year or if it is pushed back to next year, the buffer the government will need to have to increase spending remains relatively strong. We are already hearing that there could be a small reduction of 30 to 50 basis points in the budget deficit figures next year.