Crude shock biggest threat to GDP growth: Kaushik Basu

The Economic Survey tabled in Parliament today, pegged the economic growth at 8.75-9.25% for fiscal year 2012. Chief economic advisior to finance ministry Kaushik Basu says India can achieve 10% growth in GDP over the next three years.

However, according to Basu, the biggest threat to GDP is the rapid rise in crude oil prices. "Crude shock is the biggest downside risk to GDP growth and its escalation will be a global shock," he told CNBC-TV18.

Commenting on deregulation of petrol prices, Basu said, "We may decide to regulate petrol prices if the situation warrants itself," before hastening to add that regulation do not mean that prices will not rise. According to him, regulation would mean that the petrol price will be shared by the government and the consumer.

On fiscal consolidation and a gradual withdrawal of the fiscal stimulus package he said a careful balance will be needed to be struck between growth and inflation.

Below is a verbatim transcript of his interview on CNBC-TV18. Also watch the accompanying video.

Q: Let me start by asking you and this is on the basis of the reactions that we have been getting in through the day on the survey and usually the Economic Survey is now being seen as a big vision document which is not really rooted or connected to the budget or to the political and the economic realities that we find ourself in. Surprisingly or not surprisingly perhaps it was a conscious decision on your part that this survey seems to be more rooted or aligned to the political realities. Was that a conscious decision on your part?

A: No it is a general orientation of our team that we want to talk about the large policy choices that India faces. We want to analyse the past year that India has just lived through. But it is to do with India