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Merrill Lynch cuts GDP growth rate to 5.1%

Global rating firm and investment bank Merrill Lynch has said the Indian government may have to disburse at least Rs 30-40 billion to state governments to deal with the drought situation, which may place further pressure on the Centre's fiscal deficit.

The firm has also cut India's gross domestic product estimate to 5.10 per cent from the earlier 5.60 per cent for fiscal 2002-03 in the wake of poor rainfall at the onset of the monsoon.

Research firm Morgan Stanley has also revised its growth estimate for India's GDP to 5.10 per cent from earlier 5.6 per cent for the current fiscal.

Merrill Lynch has also revised the agricultural growth estimate to 0.8 per cent from 2.6 per cent, and industrial growth to 4 per cent from 4.5 per cent, while Morgan Stanley has slashed farm output estimate to 1.9 per cent as against 3.1 per cent earlier.

Even if rainfall improve during the rest of the monsoon, the damage was irreversible as of July 17, about 65 per cent of cropped area under cultivation had received below normal rainfall, according to a study conducted by Morgan Stanley.

It would also adversely affect rural consumption in the country. Sectors such as consumer non-durables, consumer durables, cement and automobiles were likely to feel its impact as they were much exposed to weak income growth of farmers due to erratic monsoon, the study said.

UNI

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