| Jalan: Optimistic
New Delhi, April 21: India's economy is likely to grow by 6 per cent in the current financial year (2003-2004) despite a below normal monsoon forecast, said Reserve Bank governor Bimal Jalan.
“Based on the India Meteorological Department (IMD) monsoon forecast, I expect a growth of about 6 per cent,” said Jalan.
Last week, the IMD had forecast monsoon to be 96 per cent of the long-period average, which falls in the below-normal category although a repeat of last year’s bad drought that hurt economic growth was rated unlikely by weather scientists.
A good monsoon is vital to the economy as agriculture contributes around 24 per cent to GDP and provides income to about 70 per cent of the country’s billion-plus population. Moreover, in the absence of irrigation facilities, crop cultivation is heavily dependent on rains.
Domestic growth during the year was pushed down to a meagre 4.4 per cent from 5.6 per cent clocked in the previous year (2001-02) due to drought, the worst in last 15 years. Rainfall during the year was 19 per cent below normal, resulting in drought-like conditions in 29 per cent of the country.
Jalan’s higher growth forecast comes days after apex chamber the Confederation of Indian Industry (CII) said it believed GDP growth would be between 5.5 per cent and 6.5 per cent, depending on the farm sector performance.
These predictions come after gloomier forecasts of slower growth made by the United Nation’s Economic and Social Survey and the World Bank warning that war in Iraq would impact India’s economic growth, by reducing the country’s GDP growth estimates from 6 per cent to 5.1 per cent.
Jalan said the weather office’s “96 per cent” monsoon prediction for the year was enough to kickstart the agricultural sector and the growth rate in farm output would be higher than last year. He said, “Agricultural production should rise by at least 4 to 5 per cent since it is on a lower base.”
Last year’s drought damaged crops in large parts of the country and pulled down farm sector output. It shrank 3.1 per cent in 2002-03 (April-March) compared with a growth of 5.7 per cent in the previous year.
The Indian economy is likely to grow at 6.4 per cent in 2003-04 while fiscal deficit is expected to shoot to 6.1 per cent of GDP as against a budgeted 5.6 per cent in the current fiscal, says Crisil.