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CMIE sees India's 2001-02 GDP growth at 6.3%

The Indian economy is likely to rebound in the current financial year from last year's slow growth due to healthy farm sector expansion following good monsoon rains, an independent forecaster said on Tuesday.

The Centre for Monitoring Indian Economy forecast gross domestic product in the world's second most populous country would grow by 6.3 per cent in year to March 2002, after growth of 5.2 per cent in the past year. CMIE said overall growth in the year ended March 31, 2001, was below most estimates mainly due to poor performance by the farm sector, which grew by just 0.2 per cent.

Although the farm sector directly contributes only 25-30 per cent to GDP, about two thirds of India's billion strong population depend on agriculture and related activities and their demand for goods and services is a key driver of economic growth.

Good monsoon rains are crucial for an ample harvest, which increases rural incomes and boosts consumption.

CMIE forecast growth in the agriculture sector to leapfrog to seven per cent in the current financial year.

"In June, the rains were well spread all over the country, raising hopes of a major recovery in the agricultural sector," it said.

"Riding on a smart recovery in agricultural sector, real GDP is projected to grow by 6.3 per cent."

INDUSTRIAL SECTOR SLOWDOWN

CMIE did not expect any immediate turnaround in the industrial sector, which is in the grip of a slowdown and expected the spillover from good farm sector growth to have an impact only in the second half of the fiscal year.

It forecast the industrial sector to grow by about 4.5 per cent. Preliminary government data showed growth in the sector slowed to 4.9 per cent in 2000-01 from 6.7 per cent a year earlier.

CMIE'S forecast of a turnaround comes at a time when Indian markets are being hit by a slew of bleak economic data.

Although many analysts have been hoping that good monsoon rains would boost demand from the farm sector and help the economy reverse last year's slower growth, recent data releases have been dismal. This prompted even the finance minister to talk of government measures to reverse the trend.

Latest economic indicators show a slowdown in exports and industry. Even the services sector, the main driver of growth in recent years, is expected to go into a lower gear this year.

CMIE forecast the services sector, which contributes slightly over 50 per cent to GDP, to post seven per cent growth in 2001-02 compared to 7.7 per cent a year ago.

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