Achieving more than 5% GDP in FY13 still likely?

The industrial output for the month of December stood at minus 0.6 percent and for the first nine months it was 0.7 percent. Last week, the Central Statistical Organisation (CSO) announced that its forecast for the current year’s gross domestic product (GDP) is 5 percent, which was much lower than even the conservative 5.5 percent the Reserve Bank of India (RBI) forecasted recently.

After the new index of industrial production (IIP) data, achieving even 5 percent is in danger is what most economists are worried about. But Dr Saumitra Chaudhuri, member of the Planning Commission and member of the Prime Ministers Economic Advisory Council (PMEAC) is optimistic about India achieving 5 percent growth in the current year .

"The CSO forecast is on the lower side. All months or all quarters don’t have an equal weight in GDP. The 0.7 percent figure is an annuated average of the first nine months; it is not a weighted average of the first nine months. So, one would get a somewhat different outcome if it was to apply the manufacturing IIP or the modification in the IIP on to the GDP rates,” he explained.

Below is the edited transcript of Saumitra Chaudhuri’s interview with CNBC-TV18

Q: The 5 percent CSO forecast for the current year is predicated on a 1.9 percent industrial growth. If for the first nine months we have managed only 0.7 percent is this 1.9 percent in danger. If that is in danger then surely even 5 percent is not going to be possible, would you believe that, that is the case?

A: No, let me first correct your facts and then your arithmetic. The CSO would have known of the December IIP before they put out their advance estimates. Normally this data is internally finalised at the beginning of the month. So, when they did the advance estimates they would have known that number.

Secondly, all months or all quarters don’t have an equal weight in GDP. So, if you only look at the 0.7 percent figure then that is an annuated average of the first nine months, it is not a weighted average of the first nine months. So, basically one would get a somewhat different outcome if we were to apply the manufacturing IIP or the modification in the IIP on to the GDP rates.

I don’t think that the 5 percent of CSO is at stake. It is a bit on the lower side, but time will tell. We are still in the fourth quarter. December ended quarter has not been good. We are hoping that the March ended quarter will be better, but we are in the middle of it and we will have to wait and see how things eventually work out.

Q: Do you see any u-turn at all, any first signs that things are better in these six weeks than they were in the previous six months?

A: I think so. If you travel you will find the planes are full. At the end of the day you got to believe your eyes. Look at the cargo movement and passenger movement they are looking better. Coal based thermal power is growing at 14-15 percent year-on-year and is making up for shortages on the hydro side. Things are improving, may be not as much as one would like.