20 Oct 2009 11:01 AM

Real GDP will grow by 6 per cent in 2009-10

We have revised our real GDP growth forecast for 2009-10 to 6 per cent from 5.8 per cent. This is because the industrial sector is projected to grow by 6.5 per cent and the services sector by 8.5 per cent. The Index of Industrial Production rose by 8.2 per cent in June 2009 and 6.8 per cent in the month that followed. Clearly, the country is recovering rapidly from the impact of the Global Liquidity Crisis.

Fresh investments announcements have picked up to Rs 3.3 lakh crore in the September 2009 quarter. A huge amount of investments are going under implementation and a historically high project commissioning of Rs 4.5 lakh crore is scheduled in 2009-10, as per CMIE's CapEx service. This has wiped off the fears of an abrupt halt in the investment cycle.

Though sales of Corporate India fell by 5.7 per cent in the June 2009 quarter, profits grew by a robust 19.9 per cent. We expect corporate sales to continue to fall in the September 2009 quarter, reflecting the fall in commodity prices. Sales growth will pick up in the second half of 2009-10 and range between 11 and 18 per cent. The average growth for the year, however, will still be a meagre 4.1 per cent.

Rainfall deficit was 23 per cent during the 2009 southwest monsoon season, the highest in the past 37 years. Kharif acreage declined by 5.3 per cent by end-September because of the poor rains. Decline in acreage and yield will lead to a 16 per cent fall in kharif foodgrains production in 2009-10. However, the delayed withdrawal of the southwest monsoon is expected to benefit rabi crops. We expect rabi foodgrains production to increase by 1.3 per cent and total foodcrop production to fall by 6.4 per cent in 2009-10.

Krishna Warrier
kwarrier@cmie.com