Tough times seen for Indian economy

Monday, 10 February 2003, 20:30 IST
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NEW DELHI: India's economic recovery is set to face tough challenges in the short to medium term following a sharp drop in agriculture output due to poor monsoon rains last year. "The 4.4 percent growth estimate of the Central Statistical Organisation (CSO) is very realistic. It may even be a slight overestimation," said economist D.H. Pai Panandikar. According to the advance estimates by CSO, India's gross domestic product (GDP) growth during 2002-03 is estimated at 4.4 percent, a sharp fall from the growth rate of 5.6 percent during 2001-02. "The time lag for drought to make its impact is around 7 to 8 months. After a high industrial growth from April to October, the lower 3.7 percent growth in November is an indication of things to come," Panandikar told IANS. "The higher growth in industrial and manufacturing sector will not be sustainable as the impact of drought on agriculture starts affecting rural demand." The latest economic growth estimates by the official agency is sharply lower than the Reserve Bank of India's projection of around 5.0 to 5.5 percent growth for the year ending March 31, 2003. CSO's lower growth estimate has mainly been based on the assumption that the agriculture growth will register minus 3.1 percent growth, down from 5.7 percent in 2001-02, owing to the impact of widespread drought in the country last year. The southwest monsoon, which is key to India's agriculture performance, was the lowest in 14 years during 2002. This has badly impacted the agricultural output on which 70 percent of the country's population depends for livelihood. "The agriculture, forestry and fishing sector is likely to show a decline of 3.1 per cent during 2002-03, mainly due to the prevailing drought conditions," the CSO said. "This lower growth expectation comes as no surprise. It was very much expected in view of the drought last year," said Jayant Bhuyan, secretary general of the Associated Chambers of Commerce and Industry of India (Assocham). According to Panandikar, as the raw material for industries like sugar, edible oil and textiles get impacted due drop in agriculture production, there is bound to be further slowdown in industrial activity. A section of the economists, however, are inclined to discount the government projections as flawed with the agriculture ministry sticking to their projection of a sharp drop in crop production, without giving any estimate of the winter crop due to be harvested in late March/April, "The expectation of 3.1 percent minus growth in agriculture just does not jell with the 6.5-7.0 percent growth in tertiary manufacturing and 7.0-7.5 percent in services sector without 70 percent of the population dependent on agriculture sector creating any demand," said Omkar Goswami, chief economist with the Confederation of Indian Industry. Till the last quarter, the government has been maintaining that the agriculture growth is likely to be either flat or marginally lower than in 2001-02 fiscal. "What is that has made the government change its expectations to minus 3.1 percent will have to be checked out," Goswami added. Goswami said unlike the 100 percent accuracy of industrial growth data, and about 70 percent veracity of services and infrastructure growth estimates, increasing lack of resources with CSO has made agriculture data collection very poor. "Our expectation of 5.5 percent economic growth remain as they are based on reasonable assessments," said Saumitra Chaudhuri, economic analyst with the credit rating firm ICRA India Ltd. "There is nothing to indicate that agriculture production this fiscal will be so low. "The projection of minus 3.1 percent, which is not in tune with our expectation of flat or marginally lower growth, shows the system of statistic data compilation needs to be reformed," said Chaudhuri.
Source: IANS
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