We have had a bunch of economic data, strong august Index of Industrial Production (IIP) numbers, moderate September infrastructure numbers and tepid corporate earnings. The Planning Commission is the body that processes this information for further policy action. In an interview with CNBC-TV18, Dr Saumitara Chaudhuri, Economist and Member of Planning Commission, sifts through India's macro-economic data and presents his outlook for growth.

Here is a verbatim transcript of Saumitra Chuadhuri’s exclusive interview on CNBC-TV18. Also watch the accompanying video.

Q: Let’s begin with growth. What’s the overall growth picture that you can see? Qualitatively is it fragile, quantitatively what’s the kind of gross domestic product (GDP) growth number you are comfortable with?

Chaudhuri: I see somewhere around 6.5%, it may be a bit lower or a bit higher. There is some uncertainty in this year. But there is going to be strong recovery in the second half; we don’t know how strong and we don’t know how bad the gross domestic product (GDP) for the agricultural sector will be affected by the drought or the flood. It will be affected no doubt but on the number side there is some uncertainty, so I see something like 6.5% maybe slightly lower, it could be higher.

Q: Can you gather enough evidence therefore to say that FY11 should be a much better picture. We have come out from 5.8% for two quarters to 6.1% in the Q1 of the current year. Since the second half definitely has to be better than 6% to give us an average of 6.5%. Would you say that we would be on more than 7% trajectory for FY11?

Chaudhuri: Certainly, in fact we had more than 7% trajectory even for this year had it not been for the drought on the bad harvest. The agricultural growth had been normal if the monsoons have been normal then probably we would have got close to 7% growth even this year. Next year, I think we would be shooting for much more and what is important in all of this is how strong will investment come back and that’s where government would want to take all the action necessary to encourage private corporate investment particularly in the infrastructure structure to compliment the government own assets in building up infrastructure, so that we get our strong bounds going in to the second half of this year and will building the ground through the sharp recovery of growth in the next fiscal year.

Q: Would you say that since one can see so much visibility in terms of output growth would you say that fiscal stimulus can be safely removed in the coming budget?

Chaudhuri: Fiscal stimulus was conceived in exceptional circumstances, which has passed and I would suspect that from the next budget onwards these elements of fiscal stimulus would not be there.

Q: You referred to the investment cycle and the government’s concern to spur it. Do you think that at least the early element of the investments cycle getting restored is visible at the Planning Commission’s end?

Chaudhuri: I would say that if people have pushed expansion plans to the backburner, they come back to the front of the shelf. But I think there is a need to build up some amount of momentum. I think once the momentum builds all through the winter and I suspect that’s when it will happen in infrastructure sector for instance and we are going to have much more road construction and much more power business, power generation and transmission activity surely steel and cement companies will take that message and plan accordingly.

So the infrastructure sector in a sense is a catalyst for many of these industrial investments in cement, steel, engineering and so on and I think that’s what needs to be rolled off the table for us to  be able to accelerate growth once again.

Q: You are reasonably confident about growth not just having picked up but probably improving from here, how would you look at the entire interest rate scenario. We have a policy rate of three quarter and an official inflation forecast of a 6.5% - that gives a negative policy rate in real terms. In a situation where growth appears to be picking up, isn’t it time that policy rates come back to the normal and reduce this negative interest rate in real terms?

Chaudhuri: There is a problem with that computation because tradition has been and look at real interest rates, we actually look at expected inflation rates and these are passed inflation rates, one. Second, you can look at core inflation, which takes away seasonal elements like food and so on and when you look at core inflation that figure is much smaller. But aside from all of that there is not an issue of a negative inflation rates and that’s not the only concern, the concern is that you have had a great degree of monetary accommodation, which is required in a situation when the world was in crises, our economy was in crisis too and in those exceptional circumstances are passing and therefore the monetary regime has to slowly come back to something about neutral stance and it cannot do so overnight. It went from a very tight monetary policy to a very accommodative policy within a matter of a month and that was needed for the precarious conditions in September-October 2008. But now you cannot switchback at the same speed. It will take time; it will take time, it will slow increments to get back to the neutral position, it will take a year or maybe longer than that. So you got to start at some point of time if you want to get back into at least in neutral position when the economy is firing all pistons.