Unlike Sen, Basu bullish on Q3 GDP

KOLKATA: The chief economic advisor to the finance ministry, Kaushik Basu, appears to have a different take on the extent of the impact of the negative farm sector growth on the economy as a whole, running counter to the views expressed by the country’s chief statistician, Pronab Sen, a day earlier.

While Basu expects the third quarter GDP growth to be "pretty good" , Sen has projected Q3 GDP growth lower at 6-6.5% on account of the negative agricultural growth. However, both believe farm sector growth will still be negative.

"It’s true that while we expect farm growth to be negative, the sector constitutes a mere 17% of India’s national income . That means agriculture downturn should be deflated by one-fifth or even more for its total impact on the GDP," Basu said on the sidelines of a conference organised by the American Chamber of Commerce in India here on Friday.

While Basu did not project any growth numbers, he said the services and manufacturing sectors were doing very well. "Coupled with this, in the corresponding quarter last year, the economy did badly (5.8% growth); so, this time the growth numbers should be pretty good."

"For 2009-10, the growth could be 7.5- 7.8%," Basu said. But Sen, while projecting a 7% GDP growth in 2009-10, said that "for anything higher than that the effect of drought on the farm sector will have to be taken into consideration". Finance minister Pranab Mukherjee had recently said he was hopeful of an 8% growth in 2009-10. Basu said, "The economy should be back at a 9% growth path by 2010-11.

And a double digit growth rate is entirely within range." He said the inflation spike was sector-specific and was not the only factor that should prompt a rollback of the current stimulus. "Having said that, you cannot continue with this stimulus for too long. But, how and when of the rollback is still on the table," he said.