NEW DELHI - India’s economic growth could slip to near six percent this year with the country facing the spectre of its third drought in a decade, a top government policymaker says.
In the last few months, the outlook for once-booming India has worsened with high inflation, steep interest rates, a ballooning deficit, nosediving business confidence, a falling currency and now growing worry of drought.
“If we factor in that agriculture which will not be strong ... (growth) will be closer to six percent” for the fiscal year to March 2013, Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters in New Delhi.
His forecast, delivered Friday, is down from the 6.5 percent expansion India notched up last year, and far below the close to 10 percent expansion seen during a good part of the past decade.
It comes comes as private economists also pare their growth estimates for Asia’s third-largest economy, citing concern about “deficient” monsoon rains that sweep India from June to September.
A survey of economists and industry leaders by the Associated Chambers of Commerce and Industry of India, released Saturday, said the weak monsoon and a deteriorating global situation were expected to cut growth to between 6.0 and 6.3 percent.
Goldman Sachs economist Tushar Poddar forecast in a client’s note even lower expansion of 5.7 percent.
The various projections are far below the 7.6 percent expansion initially seen in the Congress-led government’s March budget and the 6.5 percent growth forecast by India’s central bank earlier in the week.
While around six percent growth is still much faster than most other nations, the left-leaning government says much more rapid expansion is needed to lift hundreds of millions of Indians out of crushing poverty.
The weather office has forecast the rains will be “15 percent deficient” during the monsoon period which would spell drought.
A countrywide drought is declared if rainfall drops below 90 percent of average annual levels. In 2009 and in 2002, India was hit by drought, bringing misery to farmers and driving up food prices.
Already “the drought in Maharashtra (state) is the worst in last 20 years, the Gujarat drought is the worst in last 25 years and the Karnataka drought is the worst in last 40 years,” Rural Development Minister Jairam Ramesh said.
Farming’s contribution to gross domestic product has fallen from 50 percent in the 1950s to some 15 percent but remains key by supporting 700 million rural Indians and fuelling demand for everything from TVs to motorcycles and gold.
Wary of a voter backlash in general elections due in 2014, the government has promised to spend more to help people in “drought-affected” areas — making it far tougher to curb its swollen fiscal deficit.
The need for stimulus “on the back of persistent deficiency in the monsoon will turn the government’s fiscal arithmetic awry,” predicted Shubhada Rao, chief economist at India’s Yes Bank.