An errant monsoon has cast a dark cloud over the economy’s growth prospects with finance minister Pranab Mukherjee paring the 7% GDP growth rate he had projected at the time of the Budget to a more modest “6% plus’’ on Tuesday. Independent analysts too are cutting growth projections.
The finance minister, speaking on the sidelines of the Income Tax chief commissioners’ conference in the Capital, said that though the global economy had started stabilizing and early signs of revival were visible in the Indian economy too, “delayed monsoons have cast a shadow on agricultural growth…and may affect the overall GDP’’.
He, however, expressed confidence that the impact would not be more than a percentage point and growth would be in the range of 6% plus as earlier projected by the Reserve Bank of India. The FM said already 161 districts in the country are drought-hit and the government is working on a contingency plan.
The FM’s revised projection was a departure from what he had predicted just a month ago. “My target is to touch 7% GDP growth this year and take it to 8% to 9% thereafter,’’ the FM had said soon after presenting his Budget on July 6. He had, however, spelt out the basis for his optimism: “If we are supported by good monsoon this is more than possible.’’
Economic think-tanks have also painted a grim picture of the impact of falling crop acreages due to scanty rains. The Centre for Monitoring Indian Economy (CMIE) pared its GDP growth projection down to 5.8% from its earlier forecast of 6.6%.
Investment analyst Goldman Sachs also said that agriculture could decline by 2%, but retained its GDP growth forecast of 5.8%. Rating agency Crisil’s chief economist D K Joshi, however, was cautious and felt that it was too early to cut GDP growth forecast. He said a lot also depends on external factors and the recovery in industrial output.