CMIE ups India FY10 GDP growth forecast to 6.2% from 6.0%

By Neha Arora, edited by Vandana Hingorani/NewsWire18

Centre for Monitoring Indian Economy today raised its forecast for growth in Indian economy in 2009-10 (April - March) to 6.2% from 6.0% earlier due to better-than-expected performance in the first half of the year. This is the second consecutive month that the independent think tank has revised its growth forecast for the Indian economy. Last month, CMIE had raised GDP growth forecast to 6.0% from 5.8%. "The economic performance during the first half of 2009-10 turned out to be much better than our expectations. The quick and decisive response by the Reserve Bank of India to tackle the adverse impact of the global liquidity crisis has yielded results," the think tank said in a release. CMIE's forecast is lower than RBI's growth estimate of 6.5% with an upward bias for the current fiscal. The Indian economy grew 6.1% in April - June, as against 5.8% a quarter ago. Since Oct 2008, the RBI has cut Repo Rate 425 basis points, Reverse Repo 275 bps and Cash Reserve Ratio 400 bps in a bid to infuse liquidity and spur demand in the economy. However, in the mid-term review of the monetary policy for 2009-10 in October, the RBI withdrew some of the special liquidity steps to signal the first phase of the exit. The think tank also scaled up its industrial growth forecast to 7.2% from 5.8% earlier due to improved investment and consumption climate in the country, it said. "Both investment demand and consumption have been brisk in the first half of the year," CMIE said. India's industrial production grew 9.1% in September compared with 6.0% a year ago and 11.0% in August. In the last four months, factory output has grown at an average 8.9%. . Crop output CMIE projected a decline in crop production by 7.4% due to deficient rainfall this year. It forecast a 19% decline in kharif output, slightly higher than the government's estimate of 18%. "A rainfall deficit of 23% in the 2009 monsoon season and drought in many states led to a 5.3% fall in acreage and will also hit yield. The delayed withdrawal of the southwest monsoon will benefit rabi crops. But this will not be enough to make up for the loss in kharif production," it said. Southwest monsoon was 23% below normal this year, worst in 37 years. "The only discordant note in this growth story was struck by the poor southwest monsoon this year. Had there been no drought, the economic growth would have moved closer to the pre-crisis level," CMIE said.