18 Jun 2010 12:07 PM

Recovery in agriculture to boost GDP growth in 2010-11

We project that the agricultural sector will grow by a strong 5.8 per cent in 2010-11. This is because the India Metereological Department has projected normal rainfall this year and kharif sowing has already begun at a satisfactory pace. Acreage under rice, sugarcane and cotton are already higher than their year-ago levels. Sowing is expected to accelerate by end-June 2010 once the monsoon sets in firmly.

Sowing is expected to gather pace even before end-June in Andhra Pradesh, Tamil Nadu, Orissa and West Bengal, Rajasthan and Gujarat as these regions received good pre-monsoon rains because of the cyclone Laila and the cyclone Phet.

A dismal performance by the agricultural sector had pulled down the GDP growth in the last two years. The agricultural sector, including forestry and fishing, had grown by a measly 1.6 per cent in 2008-09 and 0.2 per cent in 2009-10. This had pulled down the GDP growth of the country to 6.7 per cent in 2008-09 and 7.4 per cent in 2009-10 from over nine per cent in the preceding years.

However, the GDP is projected to grow by 9.2 per cent in 2010-11. The main drivers are likely to be the robust recovery in the agricultural sector and acceleration in the industrial and the services sectors.

The industrial sector (including construction) is projected to grow by 9.6 per cent in fiscal 2010-11, better than the 9.2 per cent growth recorded in 2009-10. Growth in the manufacturing sector will be led by the food products segment, particularly sugar and edible oil.

We expect construction activities to accelerate in fiscal 2010-11. CMIE's CapEx database reveals that projects worth Rs.6.5 lakh crore are scheduled to be commissioned during 2010-11, as against close to Rs.4 lakh crore in 2009-10. The spurt in CapEx will push up construction activities in 2010-11. The services sector is projected to grow by 9.8 per cent in 2010-11, as compared to 8.6 per cent in 2009-10. The trade and transport segment will lead this growth.

Chintamani Athalye
asamir@cmie.com