| A group makes its way across a rail bridge near flood-hit Ahmedabad on Thursday. (AFP)
New Delhi, June 30: The southwest monsoon has covered the entire country, two weeks ahead of schedule, raising hopes of a 7-7.5 per cent gross domestic product (GDP) growth this fiscal.
The government now believes that the rains this year will be, at worst, 15 per cent below normal. “This should have a tremendous impact on farm output, which we were earlier expecting to fall badly... the demand rub-off on consumer goods and other goods will also ensure higher growth for manufactures,” said a senior finance ministry official monitoring the impact of a delayed monsoon.
North Block had reduced its internal GDP growth forecast to 6.5 per cent based on a poorer show by the monsoon. “But this shower has changed all that,” said an official.
The faster spread of the June-September monsoon, a key factor driving rural demand and farm growth, comes after a deficiency in rainfall of 49 per cent in the first three weeks.
The higher growth estimate comes on the back of officially released statistics for the last fiscal which states the Indian economy grew by 6.9 per cent in 2004-05 on the back of a 7 per cent growth in the last quarter. This is in line with earlier forecasts made by the government.
Officials said the finance ministry expects the farm growth this year (2005-06) to be around 3 per cent, which could push up the GDP growth over 7 per cent and contain inflation at 5 per cent.
“Higher farm growth or a surge in industrial output could push this GDP growth figure towards 7.5 per cent,” an official said.
The monsoon is closely watched in India because two-thirds of the population earn a living from farms. Earlier, there were fears of a delay of 10 days or more which could hit the winter crops, sown in June and July and harvested in October and November.
Although India has developed adequate financial muscle to withstand the impact of a bad monsoon, the rains still play a pivotal role in deciding economic growth rates and even consumption patterns.
In years when farm growth took a hit because of a poor monsoon, consumer demand slackened noticeably, pulling down sales of even manufactured goods, studies have shown in the past.
The good news about the monsoon helped jack up the Bombay Stock Exchange share index by more than 1 per cent to 7,218.28 points, just off its record 7,228.21 on June 27. Stocks of consumer goods and auto companies rose sharply on expectations of a demand spur, fed by higher farm incomes.
Agriculture experts are optimistic about a turnaround in kharif sowing that has been affected by the late arrival of monsoon.
Going by previous statistics, the probability of this year having a normal monsoon is “very high”, a special report of the Indian Meteorological Department said.