GDP numbers largely in line with expectations: Janak Desai, Wholesale Banking Head, ING Vysya Bank

In an interview with ET Now, Janak Desai, Wholesale Banking Head, ING Vysya Bank, gives his views on the latest GDP numbers. Excerpts:

ET Now: What do you make of the number of 6.9%? On an absolute terms, it is not spectacular but do you think it just indicates that perhaps we are not falling off the cliff and there is nothing to worry about?

Janak Desai: The numbers really have come in largely in line with expectations. So, not much of a surprise. Most of the numbers really were factored in. The question is can we get to the numbers that Dr Rangarajan was talking about from an annual GDP growth perspective and I suspect from indications that we get now. It is unlikely that the GDP growth numbers for the entire year will be anywhere significantly higher than the 7% mark.

ET Now: With respect to the RBI’s indication that there may perhaps be another rate hike this time around, what in your experience has been the outlook for credit growth, do you see it slowing down further?

Janak Desai: Clearly, the trend that you are seeing on the GDP growth and you look at manufacturing, you look at mining, any indication from a GDP growth perspective, the numbers have come in weaker than what was originally expected. By definition, that will start reflecting in credit growth as well and so our sense is that credit growth will clearly slow down. A large part of the credit growth we need to bear in mind that what we have seen in the last 6 months, some of it might also have been triggered by the oil companies having to borrow more money and has not necessarily gone into productive investment.

So all in all, yes our expectation is that credit growth will slow down and most of the speakers have spoken about policy change and the need to provide some kind of stability and comfort to industry to begin to invest again. Clearly, the industrial activity has slowed down, consumption activity is on its way to slowing down with the inflation number that we are seeing and also we need to bear in mind that the services industry has done well and with all that is happening in the external environment, the risks are only increasing, the uncertainty is only increasing. And that is something which probably is not on everybody’s radar and if the services start falling off the cliff, you will have a serious problem.