Monsoon Deficiency May Hit India's GDP Growth: Assocham

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A study by the Associated Chambers of Commerce and Industry of India or Assocham, revealed that 25% deficiency in rainfall during the South-West monsoon up to August 5, coupled with global economic slowdown, could impact India's GDP to fall to 4.7% during the current fiscal year. If there is no any improvement in monsoon during the remaining period of the South-Western monsoon (June-September), then the country could face Scenario-3, it said.

Given that rainfall has a high (60% plus)correlation with agriculture output and domestic private demand (50% plus), a severely-deficient monsoon could impact India's GDP by 2 percentage points.

Assocham president Sajjan Jindal said the chamber expected a 5% growth in the industry sector, in the midst of low-base effect during the ensuing quarters, and some pick-up in the consumer durables segment of the manufacturing sector and a strong pick-up in infrastructure activities--coal, electricity, cement and finished steel.

However, the declining trend of merchandise exports, which have posted the ninth consecutive fall of 29% in June this year is a major worry for the industry. "We hope the lower base effect will also be beneficial for merchandise exports, and some improvement is expected post September-October months of 2009", he added.

As the cement and steel sectors performed well, it was expected the construction sector to grow at 9% this fiscal. The government's increased focus on urban and rural infrastructure and rural housing boosted the performance of this sector, Jindal said.

Amid a slowdown in tourism and transportation, Assocham expects the services sector to be able to post 8.5% plus growth during the current fiscal in the backdrop of tremendous activity in community, social and personal services.

Most importantly, if the monsoon-deficiency remains normal at 7%, agriculture GDP is expected to grow at 2% and the overall GDP to grow at 6.7%. However, if the monsoon-deficiency is increased to 15%, then the agriculture sector could post a negative growth of (-)2% and the overall GDP could decelerate to 5.6%. If the monsoon-deficiency is at 22%, the agriculture GDP could decelerate to (-)6% and the overall GDP growth could decline to 4.7%, the Assocham added.

(Market News Provided by RTTNews)