GDP likely to grow 6.5% in next fiscal: RBS

The July-September GDP performance has slowed down to 5.3 percent from 5.5 percent in last quarter and 6.7 percent in corresponding quarter last fiscal. Sanjay Mathur, RBS, spoke to CNBC-TV18 about his GDP expectation for the next fiscal and why he thinks 5.3 percent is the bottom of the cycle.

Below is an edited transcript of the interview on CNBC-TV18

Q: You said you expected these numbers, do you think this will be the worst?

A:Yes, we were around this number; to be sure we were 5.5 percent. This is probably the bottom of the cycle. There are two things to keep in mind, first, the base effects will get more compelling as we move further out. The second issue is to go from 5.3 percent to 6 percent, but is that really the kind of growth we would expect from a domestic demand driven economy like India?
Should we not be aiming for a higher trend GDP number or shouldn’t the trend be higher? That’s why it is still quite challenging from a stability standpoint whether a slight improvement is really going to improve the tax collections for the government, is it going to bring enough confidence so that we get another wave of FDI or an investment cycle to start and that is really the question from hereon. Q: In case of micro which is basically the consumption pattern. Last quarter’s services number which came in at 6.9 percent had a lot of hype as to how consumption is slowing down. That was indicated in the IIP numbers as well. Would you now be less pessimistic with regards to consumption slowing down, so that there could be more growth in the consumer goods possibly in the IIP figures and also in terms of services going forward?
A: I think so. There will be a modest improvement. Also, the inflation numbers are showing some signs of stabilization which means that your real income growth or purchasing power is not falling as rapidly as it was earlier. The increase would be fairly modest from hereon, but we have bottomed out, we see only a little bit of improvement going forward. Q: How would you look at FY14? If you are averaging 5.4-5.6 percent for the current year in terms of estimates, do you think we may be able to do 7 percent plus in FY14?
A: We still think it will be about 6.5 percent next year. There isn’t really a very strong case in terms of the investment cycle going back to levels which would give you 7 plus growth number.