Fall in services sector numbers a surprise: Upasna Bhardwaj

Interview with Economist, ING Vysya Bank

India's annual economic growth slumped in the January-March quarter to a nine-year low of 5.3%. Upasna Bhardwaj, economist, ING Vysya Bank tells Jinsy Mathew that the numbers are a reflection of weakness in the economy. Edited excerpts:

The GDP growth in the January – March 2012 quarter slipped to 5.3%, as per figures released earlier in the day today. Were you expecting such a sharp decline?
We weren’t expecting such a fall in the Q4 GDP numbers. Though weakness in the manufacturing and agriculture sectors was expected, it’s the fall in the services sector that has caught us off guard. This drop is a huge concern for us now. Even among the services sectors, it’s the transport and communication sectors that have taken a hit. This clearly reflects the weak economic activity.

Does this mean that the Government has to do the much required fire fighting more aggressively?
There is no doubt that the Government should take enough measures that are needed to kick-start the investment activity. The Reserve Bank of India (RBI) has done its share of measures, which are expected to play out in the coming quarters. However, the current situation may warrant the government and the RBI to act in tandem, as the core inflation continues to remain on the downside.

Do you see the FY13 GDP come in below 6%?
No. However, if the Government doesn’t make any credible moves, it is very much a possibility.  We feel that the supply bottlenecks have to improve. Otherwise, we may be in for a long drawn slowdown.

Recently, many foreign brokerages had toned down their GDP forecast from around 7% to 6.5%. What is a realistic figure according to you?
I expect the investment activity to pick-up pace in the second half of this fiscal. The reduction in lending rates will be playing out with a lag effect. So, the GDP between 6.5 – 7% is the probable range I am looking at. Off-late, we had news about companies getting environmental clearance, which is a positive sign.