GDP growth may slow to 5.6-5.8%

The 7.5 per cent drop in the kharif foodgrain output is likely to lower gross domestic product (GDP) growth to around 5.6-5.8 per cent in the current fiscal.

"If the rest of the economy grows at 8 per cent, a 3 per cent drop in agricultural GDP will reduce economic growth to 5.4 per cent in 2004-05," said Saumitra Chaudhuri, economic advisor, ICRA.

The revised estimates for the kharif season were likely to be 2-3 million tonnes higher at 102 million tonnes, Chaudhuri said.

"This would translate into a 3 per cent fall in production for the full year and overall economic growth would then be close to 6 per cent. More likely, around 5.8 per cent," he added.

Crisil is however sticking to its initial GDP forecast of 5.6 per cent. "We had forecast a 2.5 per cent dip in agricultural GDP, 6.8 per cent growth in industry and 8.4 per cent growth in services. In 2002, agricultural GDP went down by 5.2 per cent and the situation was much worse. We are sticking to our earlier estimates," said Subir Gokarn, chief economist, Crisil.

According to the agriculture ministry, the drop in production is primarily on account of the fall in acreage of foodgrain. However, the late rains might mean the areas had been used to sow short duration crops and the kharif estimates were probably on the lower side, said Pranab Sen, advisor, Planning Commission.

The kharif crop accounts for half of grain production and foodgrain constitutes about half of agricultural production, he added. This translates into a 2.5 per cent drop in agricultural output.