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Feb 28, 2013, 07.53 AM IST | Source: CNBC-TV18

Economic Survey: StanChart Bank wary of govt's ambitious growth targets

Samiran Chakrabarty of Standard Chartered Bank says the economy may recover but not as much as the Economic Survey expects it to.

Samiran Chakrabarty

Regional Head of Research

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Samiran Chakrabarty of Standard Chartered Bank says the economy may recover but not as much as the Economic Survey expects it to.  The Economic Survey 2012-13 , tabled in the Parliament today, pegs the Indian economy growth between 6.1 percent and 6.7 percent for FY14, but adds, the revival will be slow in the near-term.

"We all know what happened in FY13. The economy did not recover. It continued on decelerating path for most of the time. So, it is difficult to say that the economic recovery will be so much that will move to 6.5 percent from 5 percent in FY13," he told CNBC-TV18 in an interview. 

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Will any number in the Economic Survey change your numbers or your forecast for the Budget? Do they even give you a whiff of the nominal gross domestic product (GDP) they will assume?

A: Not really. I would expect a lot of discussion around two other things. One is current account deficit. Is it becoming a structural issue for India and to what extent we can address this through fiscal measures?

The other is the decline in long-term savings rates particularly household financial savings and what is the genesis of this and what could be done to get it back on track? I think these two issues apart from the investment driven growth issue should be the highlights on the survey. These are areas where ideas are required not just for this Budget but probably over the course of next two-three years. So, unless we start today, it will be too late for that.

Q: Do you agree that 6.1-6.7 percent is perhaps an ambitious assumption and therefore if they go with Rs 112 lakh crore or 112.5 lakh crore nominal GDP, from the start you will doubt all the targets that the Budget lays out?

A: If compared to the last Economic Survey, the uncanny similarity is that both of them were saying economy was bottoming out. Also that probably in the next couple of quarters it will start turning around. The language seems to be exactly the same.

However, we all know what happened in FY13. The economy did not recover, it continued on decelerating path for most of the time. So, it is difficult to say that the economic recovery will be so much that will move to 6.5 percent from 5 percent in FY13.

If that number is correct. There seems to be no specific assumption or at least none that I have seen on the screen about what will drive this improvement from 5 percent to 6.5 percent. Is it going to be investment, consumption or the net exports. Especially given the fact that the government side there will be a contraction.

Q: A little bit of monetary easing is assumed and beyond that even I do not see so far anything to assume.

Yes, but we all know that monetary easing is not good enough to kick start a capex cycle in a fashion that can prompt growth up from 5 percent to 6.5 percent. Having said that last year we projected a survey that will grow around eight plus.

We ended with something like 5 percent. So, compared to that this time the disappointment might be more limited. So, even if we do not get 6.5, we would get something around 6 percent mark. So, it is not going to be too divergent from their expectation at least that is what I hope.

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