Home > Macro Trends, Market View > Drought effect on India's GDP

Drought effect on India's GDP

Saturday, August 15, 2009 Leave a comment Go to comments

It is interesting to note that most of the research houses have upped India’s GDP growth target despite a severe drought. Here is a good analysis of the impact of drought on India’s GDP. Here are some key points.

A quick number crunching by Indicus Analytics for ET on the 167-odd drought declared districts spread across seven states reveal that if you add all income from agriculture across these districts, it amounts to less than 3% of the country’s GDP, down from 4% in early 2000s.

Morgan Stanley India & South Asia economist Chetan Ahya recently upped his India GDP outlook to 6.4% from earlier estimate of 6.2% even as he nudged down agriculture growth from 3% to 1.5% for 2009. Ratings agency Standard and Poor’s too revised India growth to 6.3% on Thursday from an earlier forecast of 6%, with a rider that it will revisit the forecast in about three weeks time when the monsoon picture becomes clear.

Investment bank Goldman Sachs analysts Pranjul Bhandari and Tushar Poddar writing in a Wednesday ‘Asia Economic Data Flash’ also concur that the recent upside in industrial activity—India’s industrial production up by a robust 7.8% in June—is likely to provide the economy with the buoy to float high despite poor rains. Goldman has maintained its 5.8% GDP figure for 2009, while it has raised its estimate for FY11 to 7.8%, up 1.2% from its last reading.

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Categories: Macro Trends, Market View
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