7% GDP growth: Deepak Parekh says yes; no, says Rahul Bajaj

The quarter-three figures for this year have badly hit India's hope for 7% growth. In turn the government's response could dangerously kick up the fiscal deficit and with elections just 70-days away, the future could be clouded with uncertainty. So what does this mean? What will GDP numbers for the year-end be?

Also read: Economists rubbish govt's 7% GDP growth claim

Deepak Parekh, Chairman, HDFC Bank; Rahul Bajaj, Chairman, Bajaj Auto; Rajiv Kumar, Director & Chief Executive, ICRIER; Surjit Bhalla, Chairman, Oxus Investments; and Prem Shankar Jha, Columnist and Author, discuss the issue.

Here is a verbatim transcript of their exclusive interview on CNBC-TV18's show War of Words anchored by Karan Thapar. Also see the accompanying video.

Q: The quarter-three GDP figures came in as a nasty surprise. Between October and December the economy only grew by 5.3%, whilst manufacturing and agriculture actually shrank. In your eyes is this just one bad quarter or is it bad news altogether?

Kumar: It was no a surprise for some of us because on December 3 we had forecast that the Indian economy would grow only at 6.4% for 2008-09. We had anticipated growth for the latter half of the year would come in at about 5%. What you are seeing is the beginning of a real downturn in the Indian economy. I would expect the fourth-quarter to actually be even lower at about 4%.

Q: So then your answer is, this is not just one bad quarter, this is bad news altogether?

Kumar: This is bad news, which is unfortunately likely to continue for about three-quarters at least.

Q: The Finance Minister Pranab Mukherjee insists that despite the depressing news from quarter-three, the economy for the year as a whole is still going to achieve 7% growth. Do you believe him or do you think he is simply putting on a brave face?

Parekh: I agree with Rajiv on the first point. It was not a surprise at all as Q3 was expected to be a disaster. In October-November, business came to a standstill. Banks did not lend any money; banks did not borrow any money and the financial markets were closed for business. But where I disagree with Rajiv is that I see much more buoyant numbers in January and February. I think the last quarter of our fiscal year, we will see a higher than 5.3% growth and I agree with the government's estimate that we will get towards the 7%.

Q: So you think Pranab Mukherjee is substantially is correct, is that right?

Parekh: That's right.

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