India's growth rate not to fall below 6.25%: Arvind Virmani

Excerpts from What's Hot on CNBC-TV18 Watch the full show » Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

He is the man who helmed the team that wrote the economic survey that the government presented on Thursday and what is now being perceived as the most ambitious document on reforms and divestment to come out from the government.

In an exclusive interview on CNBC-TV18, Arvind Virmani, the chief economic advisor to the government of India, said India's growth rate should not be less than 6.25%. He added that he would be happy if even half the measures suggested in the survey were implemented.

Virmani also spoke on his GDP forecasts for the year. Read on.

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

Q: A quick reading of the economic survey suggests that it is perhaps the most aggressive survey in years. How much of this truly can actually be translated into policy action?

A: One useful way I can respond is that many, many years ago, around 1999 is the last time I did a paper, which laid out a policy framework. I can tell you that some of those recommendations have still not been adopted but many have been. So as a kind of rough and ready statement, I would say that if, at the end of five years, perhaps let's say 50% of the things mentioned here get implemented, I would be very happy as somebody who wrote or led the team which wrote this away.

Q: Your GDP growth projections of over +/- 7.5%? Many believe it is not entirely realistic but do you think it is feasible?

A: When I first suggested a U-shaped recovery and a 7% growth in March of this year, there was lot more ifs and buts. After that there have been lot of pessimistic reports - there has been a whole cycle of views actually, a whole bunch of pessimistic reports came out and then there has been this big green shoots euphoria and other movements but I feel more confident now then I did let us say in March that we will have the mean forecast of 7%. So a much of the ifs and buts are now in that +/- 0.75% that I have put there.

What it says is that normally one can never be perfect in a forecast. So normally I would put a range of 0.5% plus or minus. I have expanded it 0.75% because the uncertainty from the global situation is much higher but that uncertainty is now more or less captured in that 0.75% which is that even if things are much worse than the mean in the global context, our growth rate should not be less than 6.25% which is 7% minus 0.75%.

Q: The survey suggests that the government is still in a fiscally expansive mode. Now does this mean or can one actually interpret that as going forward in the budget there will not be a reversal of the indirect tax cuts that were announced in the interim budget?

A: What the Finance Minister clearly stated which we have repeated in the survey is that a stimulus, in economic terms an increase in the fiscal deficit above some base level is necessary during the current year and he said very clearly that it would continue because the demand conditions which made it necessary have not reversed as yet.

On the other hand he also stated very clearly if I remember in his interim budget speech and the reply to the Lok Sabha and Rajya Sabha that he would go back to the fiscal deficit targets which are there in the FRBM as soon as possible and if possible by 2010-11.

Q: A word on the oil price deregulation - USD 80 per barrel is what the survey suggests for possible deregulation but the Petroleum Minister is talking about USD 75 per barrel.

A: I cannot comment on something that a minister has talked about. But what I can tell you is that the number which the USD 70-80 per barrel is during when the prices rose to 147 per barrel, I met many top oil company representatives from India and the world and my understanding is that USD 70-80 per barrel is what they call the medium-term supply price of oil, which we have used. That's the economic rationale for using some number like that.