New Delhi: “Services will prove to be a stabiliser for the Indian economy to enable it grow by 7.5-8% this fiscal,” a key Finance Ministry official said adding: “Amid fears on the part of some that the sector will slow down in a major way in the remaining months of 2008-09.”
“Services will generally have no cyclical decline than overall GDP and certainly decline much less than manufacturing, which is cyclical in most countries. Services will act as a stabiliser for us,” Chief Economic Advisor (CEA) Arvind Virmani said.
Virmani said that the services sector, along with others, did slow down in the first half, moderating growth to 7.8% in the first half of the current fiscal compared to 9.3% a year ago.
However, he did not agree with the view of some that services would slow down in a major way in the second half.
“We know from cyclical events that historically services are less affected by the cyclical shocks. Whatever the source of these cyclical shocks, I don’t see any reason why that should be overturned,” Virmani said.
Even as services helped the Indian economy clock better than expected growth in the first half, many economists say that the sector would slow down much more in the second half and restrict growth to 7% or less for the whole fiscal.
Virmani said: “Those who are saying growth would be 7% have to tell you what slowdown they are expecting. I am saying the growth rate is 7.8% (in the first half) and you will still get at least 7.5% (for the entire fiscal).
“So slowdown is implicit, but it will be consistent with the projection of 7.5-8% overall growth,” he said.