Mumbai: India’s real GDP is projected to grow by 7% in FY10, the Centre for Monitoring Indian Economy (CMIE) said in its monthly review here.
CMIE expects the growth rate to climb slowly from around 6% in the first-half to about 8% in the second-half of FY10.
The real GDP (gross domestic product) would be close to the 7.1% growth that is likely to be achieved in FY09. The global liquidity crisis in late September 2008 has suddenly brought the economy’s story of 9% growth to a grinding halt. FY10 would gradually recover from this jolt.
Signs of recovery are already evident in the little data that is available for January 2009. While the global economy seems to be getting into a deep crisis, the domestic Indian economy is likely to see a smarter and quicker recovery in FY10, it said.
The agricultural sector has traditionally been the principal source of volatility in the overall growth of the Indian economy. A decline in GDP growth is usually the result of a fall in agricultural production.
In the last ten-year period ending 2005, the agricultural sector recorded a fall in output in every alternate year.
CMIE pointed out that this seriously debilitating trend seems to have been reversed. The agriculture sector has registered positive growth for four consecutive years-from FY06 to FY09.
CMIE expects it to register a positive growth rate again for the fifth consecutive year, in FY10.
We expect the growth rate to slow down to 2.4%. Nevertheless, a fifth consecutive year of positive growth in agriculture would contribute directly to the growth in FY10 and would have a positive impact on domestic demand, CMIE report said.
The agriculture sector registered a 2.2% fall in output in the third quarter of FY09. This decline was not expected, although it comes after a 2.4% fall in kharif sowing and, it comes over a high base since the corresponding quarter a year ago had seen a growth of 6.9%.
We believe that at least a part of the fall may get corrected with revisions in agriculture production data. This is likely to happen in the case of cotton and to a small extent in the case of rice.
The fall of October-December 2008 does not dilute the new confidence in agriculture because production is increasingly shifting in favour of the Rabi season. And, while Kharif sowing was down by 2.4%, Rabi sowing is up by 3.1%. Higher MSPs and market prices have spurred sowings in favour of cash crops, CMIE said.