A leading Indian economic think tank has cut its forecast for growth in Asia's fourth-largest economy in the year to March 2006 to 6.0 percent from 6.6 percent as it fears insufficient monsoon rains could shrink farm output. The Centre for Monitoring Indian Economy (CMIE) has estimated that farm output will fall 0.7 percent in 2005/06 (April-March), compared with a 3.1 percent increase projected in April.
It, however, held its growth forecasts for the industrial and services sectors at 8.5 percent and 7.5 percent, respectively.
"The south-west monsoon arrived over Kerala after a delay of four days and its progress in the following days was unsatisfactory. Forecasts for June and July are not good," the CMIE said in its latest monthly review of the Indian economy.
The downward revision in the forecast was largely shrugged off by the Indian financial markets, with stocks and federal bonds unchanged on the news.
But the rupee, already under pressure from the dollar's gains overseas, slipped to a one-week intra-day low of 43.63/64 per dollar.
Analysts, however, said it may be premature to revise the country's farm and overall economic output forecasts now.
"We continue to see growth in this fiscal year at 7 percent," said Siddharth Mathur, strategist at J.P. Morgan Chase Bank.
"That said rainfall during the four-month monsoon season, which has just begun, is a critical determinant of India's rate of growth and will bear close watching."
The Indian finance minister and the central bank expect overall GDP growth in the current financial year to be 7 percent.
MONSOON WATCH: The June-September monsoon struck the southern state of Kerala on June 5, slightly behind schedule, and has advanced to parts of Tamil Nadu, Andhra Pradesh, Karnataka and Goa.
Weather officials said rains were 51 percent lower than normal in the country during June 1-8, with half of the 36 meteorological divisions getting scanty rains - defined as rainfall between 60 percent and 99 percent below normal.
"Such deficiency in rains in June and July could severely damage agricultural production in the current kharif (winter) season," the CMIE said.
The think tank said production of oilseeds, wheat and rice could be the worst hit with falls of 12.2 percent, 2.8 percent and 0.1 percent respectively.
The monsoon is crucial for a majority of India's poorly irrigated farms and inadequate, untimely or unevenly distributed rains can hurt crops as well as incomes in the rural areas where two-thirds of the country's billion-plus people live.
Analysts said a clearer picture of the monsoon and its likely impact on farming would emerge next month.
"The bulk of the sowing is done in July," said Chetan Ahya, economist at J.M. Morgan Stanley in a weekly report on the monsoon.
"We believe that the first clear assessment of likely agricultural growth for the year can be made only after mid-July."
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