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JP Morgan cuts India GDP growth forecast to 5.3%

Broking firm JP Morgan has lowered its estimate of India's gross domestic product growth for the current financial year to 5.3 per cent from its earlier forecast of 6.0 per cent due to sluggish demand.

In a report made available to Reuters on Wednesday, the firm said it was also trimming its forecast for 2002-2003 (April-March) to 6.2 per cent from the earlier 6.5 per cent.

Official figures point to a slowdown, with the Indian economy expanding by an estimated 5.2 per cent in the year to March, down from 6.4 per cent the previous year.

Union Finance Minister Yashwant Sinha, however, said last week he expected a turnaround before the year end, helped by stronger demand and an improvement in the global economy.

India's central bank said on Tuesday that it expects India's GDP growth to be close to 6 per cent in 2001-02 based on expectations of a good monsoon this season, which is likely to help farm output.

The monsoon supplies 80 per cent of the farm sector's water needs and is key for a bumper harvest.

The government is counting on good rains to boost incomes and increase demand in rural areas, where two-thirds of India's billion-plus population lives.

JP Morgan said it expected agricultural and industrial sectors to rebound mildly leading to a turnaround in the economy in October, but the distribution of rainwater from a good monsoon will be crucial.

"Nonetheless, a 2.6 per cent year-on-year growth in agriculture appears to be plausible on the basis of a low base and preliminary monsoon news," the report said. "This should lead the way for a rebound in industrial activity."

India's farm output grew by just 0.2 per cent in 2000-01.

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