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CMIE lowers farm sector forecasts

Independent forecaster Centre for Monitoring Indian Economy said it expected the Indian farm sector to contract by 3.5 per cent in the current year to March compared with last year's growth of 5.7 per cent.

"The damage to the crops that we saw in June-July spilled over to August-September, worsening the prospects for the rest of the year," Mahesh Vyas, executive director of the think-tank, told Reuters on Thursday.

Rainfall in the main June-September monsoon season was 19 per cent below normal, the poorest in nearly 15 years, which prompted economists to cut their forecasts for agricultural output.

The annual southwest monsoon is crucial to India's economic health as the agricultural sector accounts for a quarter of GDP and employs close to 70 per cent of the country's billion-plus population.

CMIE had earlier forecast that India's farm sector will shrink by 2.5 per cent.

At the time of its budget announcement in February, the government had forecast the agricultural sector would grow by 3.5 per cent.

The forecaster has also lowered the growth estimates for the services sector in the current year to 6.0 per cent from 6.5 per cent it had projected earlier.

The sector grew at 6.5 per cent last year.

"There are linkages between the commodities and services sector, particularly trade and transport," said Vyas. "If foodgrains produced are less there will be less to transport and trade."

CMIE said foodgrain production in the current year will drop to 193.7 million tonnes from 211.3 million a year ago.

It had earlier estimated that foodgrain production will ease to 199.6 million tonnes.

The forecaster had earlier lowered its growth estimate for the country's gross domestic product in the current year to 3.1 per cent from its earlier projection of 4.5 per cent, blaming the poor rains.

The think-tank had also cut its estimate for this year's industrial growth to three per cent from 3.5 per cent it projected earlier.

India's industrial sector expanded by 2.8 per cent last year.

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