C Rangarajan, Former Reserve Bank Governor and Rajya Sabha MP, said the economy had done well in the recent period. "Taking all factors into account, the trend in exports, the way in which the industrial production is progressing, and also the external sector of the economy, the economy would grow in the current year between 6.5% and 7%," he added.

Here is a verbatim transcript of the exclusive interview with C Rangarajan on CNBC-TV18. Also watch the accompanying video.

Q: Let’s start with the state of the Indian economy. The economic survey which was tabled in parliament today by the Finance Minister suggests that the economy is on the fast track to recovery. It seems to predict that economic growth could be anything as much as 7.5% in the year 2009-2010. On the other hand, as you know, exports have declined steadily for eight months in a row. Manufacturing is just about at 2.5% of growth compared to 9% the year before and maybe altogether perhaps as many as 15-20 lakh jobs have been lost. What is your assessment of the state of the economy?

A: The Indian economy has done well in the recent period. In the last four years, the average rate of growth of the economy has exceeded 9%. But however the last year, as you know, because of the external factors the growth rate came down to something like 6.7%.

The growth rate of the economy was particularly affected in the second half of the year. In the second half of the year, the economy grew only at 5.8%. Taking all the factors into account, the trend in exports, the way in which the industrial production is progressing and also the external sector of the economy, I would say that the economy would grow in the current year between 6.5% and 7%.

If the external situation improves dramatically, then probably we can get a growth rate higher than 7%. But given the fact that all the forecasts point only to an improvement of the global economy in the last quarter of 2009, I would say that the growth rate of between 6.5% and 7% is probably our best estimate.

Q: Would you therefore accept the language of the economic survey that we are on a fast track to recovery or would you think that is a shade optimistic?

A: I would say that we are on the path of recovery. From 5.8% in the second half of last year, we are moving up. Therefore it is on the path of recovery.

But in my own view, by energising domestic demand we can get to somewhere around 7-7.5% of the rate of growth of the economy. But in order to achieve anything like 9% that we achieved in the previous three years, we really need the global economy to improve.

Unless the global economy improves, and our exports also pick up, I do not think that we can really get to 8-9% rate of growth of the economy that we had a couple of years ago.

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