Economic think-tank Centre for Monitoring Indian Economy (CMIE) today revised down India's growth forecast to 5.8 per cent in the current fiscal on account of lower agricultural output and slower industrial recovery due to the poor progress of monsoon.
"The impact of the lower agricultural output and the slower industrial recovery will be felt. We now expect the GDP to grow by 5.8 per cent in 2009-10 compared to 6.6 per cent expected earlier," CMIE said in a release.
It said that while the Union Budget for 2009-10 is expansionary and conducive to growth, the failure of the monsoon and its significantly adverse impact on agriculture and industry will shave off 0.8 per centage points from the GDP growth rate.
"The poor progress of the south-west monsoon till the first week of July 2009 is expected to adversely affect the prospects of growth in agriculture, in industry and in the gross domestic product of the country as a whole," CMIE said.
It said that because of the impact of the failed monsoon, production of sugar and edible oils will fall by 3.6 per cent and 2.5 per cent respectively.
Further, agro-based industries are expected to witness some stress.
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Indian economy grew at a slow pace of 6.7 per cent in 2008-09 against a growth rate of 9 per cent in the preceding four years.
CMIE said the ongoing industrial recovery will also be impacted and projected the industrial production growth at 4.8 per cent in the current fiscal against 5.1 per cent projected earlier.
"Nevertheless, this growth rate is significantly higher than the 2.4 per cent growth registered in 2008-09," it said.
Showing signs of economic recovery, industry grew 2.7 per cent in May though the growth is much lower than the 4.4 per cent recorded in the corresponding month last year.
Industrial growth during April, the first month of the current fiscal, was 1.2 per cent.
CMIE further said that potent demand and capacity expansions in non-agro-based industries such as cement, aluminium, commercial vehicles, cars and two wheelers are expected to aid industrial growth.
"These expansions and their backward and forward linkages are expected to generate employment, increase income and improve demand," CMIE said.