FY10 GDP estimate at 7.2% feasible: Experts

Excerpts from Your Stocks on CNBC-TV18 Watch the full show » RELATED NEWS India FY10 GDP may grow at 7.2%: Govt IMF forecasts India GDP growth at 6.75% in FY10 Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty?

India's economy is expected to grow at 7.2% in fiscal year 2009-10, the government said on Monday, reinforcing the possibility it may start to unwind its fiscal stimulus in the forthcoming Budget.

In an interview with CNBC-TV18, Atsi Sheth of Macro Sutra and Saugata Bhattacharya of Axis Bank spoke about the GDP forecast and the road ahead for the economy.

Here is a verbatim transcript of the exclusive interview with Atsi Sheth and Saugata Bhattacharya on CNBC-TV18. Also watch the accompanying video.

Q: 7.2% is a little better than what you guessed?

Sheth: Yes, we were at 7% and I think anything between 6.5-7% seemed reasonable given the data that we have. Even though economists pretend otherwise, forecasting is a very inexact science. So for all practical purposes 7.2% is equivalent to 7% and that seems like a very reasonable estimate.

Q: The Reserve Bank of India has gone with a zero percent agriculture for the full year. Is zero too ambitious? Should we have contracting agricultural number?

Sheth: If there is one thing that's inexact in forecasting its agricultural growth. We have the numbers until September of course and it's the October to December number, which I still believe will be negative. But from what we know of the rabi outlook and even for instance leading indicators like the flowering at the mango trees, which I personally follow, tells you that the rabi harvest will probably be good.

So I think you will have the last quarter coming in positive for agriculture.

Q: It's come in at 7.2%. That's almost as your forecast was?

Bhattacharya: Pretty much yes, 7.1% was our estimate and that was downgraded a little bit from the new numbers that we had been hearing about agriculture. We had also expected agricultural growth to have been flat this year. The surprise from the numbers that you mentioned seems to be services - 8.7%, I think you mentioned and that seems to be little bit lower than probably what we will see later on down the line.

These being as you said the first advance estimates, the forecast for the year because whatever we have been seeing despite the increase in the community and personal services that would probably have defused out into other areas than what we have been seeing of telecom subscribers, from freight growth, in banking statistics and so on.

My sense is that we might get to see somewhat higher services growth than the first set of numbers that we have seen. But, of course as you said, we all rely on secondary data and these guys are the primary sources of information so we just need to wait and watch.

Q: Services at 8.7% this must be a big jump from the over 9% that India did last second half?

Sheth: In fact, I am fairly comfortable with 8.7%. Some people include construction and services but I think this 8.7% number excludes construction. The big drag on it like you said before will be that community and personal and social services will probably be in the second half at least much lower than in the first half. I think trade, finance those are the ones that they are expecting an upswing in and that's what brining the number up to 8.7%. That would be my guess that if manufacturing is the lead and manufacture is leading us out of the downturn and with manufacturing trade, transport, finance - all of that tends to go up so those will be the ones that pull it up.

Q: Do you think by giving in 7.2% the government is probably preparing a ground or the government has the ground to continue some fiscal stimulus after all it does look like you are not still in your trend growth?

Sheth: That's interesting. So they are putting out a number that supports the budget coming out a little bit more stimulatory than anticipated and I share the view that a sudden withdrawal of stimulus is not on the cards be it for political or economic reasons but I certainly think that this number if you look back to last year, they said 7.1% and the actual number came in at 6.7%.

So the estimate tend to skew close to the data that they have on hand and I think that whether it's driven by policy intensions or not it's a very believable number and given this number do I think stimulus should be withdrawn completely perhaps in stages not completely.