Drought may dampen June-qtr growth momentum: HDFC Bank

Drought may dampen June-qtr growth momentum: HDFC Bank

Mumbai: India’s economic growth, which accelerated to 6.1% in the June-quarter is unlikely to sustain as drought conditions could dampen initial recovery signs, HDFC Bank said in a note.

The economy will probably grow 5.8% in the year ending March 2010 as scanty rains could take the 2.4% farm production number down by 3-5%, Abheek Barua, chief economist at the bank, wrote on Monday.

“However, initial robustness in both the industrial and services sector should continue through the rest of the year," he added.

The services sector, which accounts for more than 57% of the economy’s output, grew an annual 7.8% in the June quarter, compared with 10.2% in the year-ago period. It will probably grow 8.6% in 2009/10.

Industry, which grew 5% in the June-quarter from 6% a year ago, may end the year with a growth of 5.2%, the economists added.

Income supports from government initiatives and lower dependence on the agricultural sector could act as significant offsets to lower agricultural growth and help industry and services, the bank said.