The Telegraph
Since 1st March, 1999
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Drought burns high-growth hopes

New Delhi, June 30: The BJP-led government today revised downwards estimates of its GDP (gross domestic product) growth to 4.3 per cent for the year ended March 2003.

It had earlier, in a pre-budget forecast, pegged GDP growth at 4.4 per cent compared with 5.6 per cent a year earlier. “The reduction is marginal and really reaffirms what we had been speaking about — lower growth because of poor farm sector performance,” said B. B. Bhattacharya, director of the Institute of Economic Growth.

A severe drought, which saw the farm sector shrinking by 3.2 per cent in 2002-03 compared with a 5.7 per cent growth a year earlier, was the main culprit for lower figures, said analysts, who calculated that per capita income growth would be around 2.4 per cent at these levels of GDP increase. This too is far lower compared with 4.3 per cent per capita growth a year ago.

The manufacturing sector, however, grew by a robust 6.1 per cent compared with 3.4 per cent growth in the year-ago period. “This is surprising and it nails the industrial chambers’ claims that they are facing a major downside,” said a top finance ministry official.

The data released by the central statistical organisation (CSO) today showed GDP grew 4.9 per cent in the fourth quarter of 2002-03 compared with 6.3 per cent a year ago. The manufacturing sector was up 7.1 per cent in the fourth quarter compared with 4.1 per cent a year earlier.

The government, however, feels it can achieve the Reserve Bank’s forecast of 6 per cent GDP growth for the current fiscal and batter down inflation from a current high of 6.4 per cent to nearer 5 per cent, despite the Iraq war and its fallout on Indian exports.

Bhattacharya agreed stating, “Growth should be around 6 per cent if the monsoon doesn’t play around. We have to realise it is not the quantum of the rainfall but the geographical dispersion which counts for a good farm year.”

A top finance ministry official said: “The profits of top 150 companies have gone up more than 32 per cent because of lower interest costs. Companies are functioning efficiently and so the economy is functioning efficiently. Non-petroleum and capital goods imports are rising, which implies investments are taking place.”

A normal monsoon, which is “now a reality”, could see growth rates soaring and a reversal of farm sector growth. It will also help push up demand for industrial goods.

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