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    Expect GDP growth to be in 5.5% to 5.8% range for the year: Saugata Bhattacharya

    Synopsis

    "I have a feeling that you will see a fairly high personal consumption growth that is likely to have driven that number up"

    ET Now
    In a chat with ET Now, Saugata Bhattacharya, Economist, Axis Bank, speaks on the GDP data. Excerpts:

    ET Now: Do these numbers point to a 6-6.5% growth or are we jumping the gun too much away?

    Saugata Bhattacharya: We should be a bit more cautious in projecting the upside. There are some idiosyncratic factors that pushed this quarter’s numbers up. One partially because of construction, industrial growth, that had a high growth rate, enabled a high growth rate due to the poor rains this time vis-à-vis the wet monsoon last year. The other factor that is a little worrying at this point in time is the spill-over of the good rabi harvest into the first quarter also helped agriculture.

    There are definitely a couple of growth engines. Export remains one. Hopefully global recovery still continues and we continue to export more. So that remains our engine. Hopefully, in the second half, particularly in the last quarter, the effects of all the measures that are incrementally being taken by the government begin to show signs on capex investment, etc. But we still remain cautious for this year, and at this point in time, it is actually beneficial to grow more gradually because otherwise given the capacity constraints and so on due to the lack of capex that we have had for the last couple of years, inflationary pressures are likely to come up. So probably the optimal growth rate should be somewhere in the 5.5 to 5.8% range.

    Mythili Bhusnurmath: If you look at the fiscal deficit numbers for the first four months, we are already at 61% and that 4.1% always did look very ambitious. So will the government continue spending or do you think they will rein in their spending as result of which we will see the services sector growth come down?

    Saugata Bhattacharya: In the first three months, we have not really seen that much of an increase in spending. It is just the poor revenue collections which blew up the deficit. My sense is the other component in the community services, which is personal services, which is essentially consumption, I have a feeling that you will see a fairly high personal consumption growth that is likely to have driven that number up.

    Secondly, it is likely that the government’s expenditure will be slightly higher than what we have seen in the past. I remain a little doubtful of the utility of very high government spending. But if the spending is managed in a manner which actually adds to capacity and begins to reduce inefficiencies, that would be good.
    The Economic Times

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