Don't see strong case yet to withdraw stimulus: CSO

Excerpts from India Business Hour on CNBC-TV18 Watch the full show » RELATED NEWS Budget '10 should focus on governance issue: Atul Punj FY10 GDP estimate at 7.2% feasible: Experts Nifty BSE | NSE 17/02/12 Are Mutual Funds betting on Nifty?

Global slowdown and deficient monsoons notwithstanding, the Indian economy is likely to power past the 7% growth level this year. The Central Statistics Organization's (CSO) full year GDP advance estimates pegs FY10 growth at 7.2% against 6.7% last fiscal.

The three main growth engines are manufacturing, mining and industry - with all three sectors expected to clock 8% plus growth. However, the government expects a decline in growth for the services and financial sectors.

As per CSO, the real laggard this year will be the farm sector. Agricultural output is likely to decline 0.2% in 2009-10 compared with a growth of 1.6% last year, mainly on account of the poor monsoon rains.

Time to withdraw stimulus?

In an interview with CNBC-TV18, Pronab Sen, Chief Statistician of India said the case at the moment is not strong enough for a withdrawal of the stimulus. "We really need to wait and see a bit."

Below is a verbatim transcript of the interview. Also watch the video.

Q: The advanced estimates suggested 7.2%. Do you think these numbers give a full sense of how strong the economic recovery has been?

A: They give some sense. They are not even expected to give a full sense. The advance estimate as we saw is an advanced estimate, which is largely a projection. It gives you a feel for what is likely to happen unless the past trends are violated in some very fundamental manner.

Q: So from the data that we have now, do you think the government can go ahead and take that call whether it wants to withdraw its stimulus measure partially or entirely?

A: Frankly no. I don't think so. It's too early to do that. In fact, if we look at the numbers carefully they do indicate a certain degree of caution. In the first instance as you might have noticed, the investment to GDP ratio is down quite significantly. That may not in itself matter a whole lot because we know that investment is down quite significantly now that in itself may not matter a whole lot because we know that investment was down the most part of the year. The real question is - are they recovering?

On that we really need to wait for the quarterly results to come in because that is what gives you a feel for the change that is taking place within the year.

Q: We have heard the government reaction coming through once your report was made public today, which says that a large part of this has been because of that stimulus. Would you attribute a fairly large part of these healthy looking estimates to that and secondly, you also made certain observations on the laggard that is the farm sector, which doesn't seem to be really looking up thanks to the monsoon? Could you throw some more light on the impact of that?

A: The stimulus package certainly has quite a bit to do with it. I don't think there is any question, which is why one needs to be cautious and one really needs to be able to track the intra-year movement in private investment, private consumptions and exports. Now, exports have a fair idea of what is going on but much of that is a little clouded by a very strong base effect because last year this time the exports were going down like a stone.

As far as the farm sector is concerned, the negative growth was expected. We have had a very poor monsoon. We have expectations of a good Rabi but we really need to wait until the crop actually starts coming up. Those estimates are not in yet but at the moment what we have for Rabi is only the figures on the acreage under cultivation.

Q: So are you saying that despite RBI's call for fiscal consolidation and despite the bounce back we have seen in industrial growth the government is unlikely to go ahead and withdraw those measures during the Budget?

A: My thinking is that the case at the moment is not strong enough and we really I think need to wait and see a bit.