Winter rains godsend for GDP growth

Given normal winter rains, which portend well for farm growth, economists are hoping that agricultural output in the last quarter of the current financial year will improve and push annual GDP growth to around 9.2 per cent for 2006-07.

Planning Commission Advisor Pronab Sen sees robust agriculture growth in the last quarter of the financial year. "If rabi crop turns out to be good in the fourth quarter, agriculture growth will be healthy," said Sen.

ICRIER Chief Executive Officer Rajiv Kumar said,, "Normally, in the fourth quarter, GDP growth is higher than the previous quarters. So I think 9.2 per cent growth is still achievable."

"There could be a jump in agriculture production in the last quarter due to good rainfall. This could lift GDP growth," Vivek Bharti, adviser, Ficci, said.

In the third-quarter of 2006-07, agriculture grew at a meagre 1.5 per cent, compared with 8.7 per cent in the same quarter last year. The economy grew at 8.9 per cent in the first quarter of the year, 9.2 per cent in the second quarter and 8.6 per cent in the third quarter. This translates into an average 8.9 per cent annual growth till December 2006.

To achieve annual 9.2 per cent for the current fiscal, as estimated by Central Statistical Organisation, the economy needs to grow at 10.1 per cent in the last quarter. Experts say an upward revision in the previous quarter data is most likely. "There will also be some upward revision in the previous quarter data, which will push GDP growth around 9 per cent," Sen observed.

Sen added that high interest rates and inflation at above 6 per cent would not dampen GDP growth. "Hardening of interest rates may affect growth only in the long run, not in the short run. And high inflation does not have any real consequence on growth," he said.

"Hardening of interest rates has a lagged effect. It will not affect growth immediately," said FICCI's Bharti.