Ind-Ra lowers FY16 GDP growth forecast to 7.5% on poor rains

Mumbai: India Ratings on Friday scaled down its GDP growth forecast for this fiscal by 20 basis points to 7.5 percent, citing lower agriculture output due to deficient rainfall.

The rating agency had earlier forecast a GDP growth of 7.7 percent.

The World Bank had yesterday retained GDP growth forecast of 7.5 percent for FY16.

"The downward revision in forecast is primarily due to the lower agricultural growth following the deficient rainfall in many parts of the country," India Ratings chief economist DK Pant said here.

Monsoon rains have been 14 percent lower than the long period average, as per the Met department.

He said said although the farm sector has over the years become more resilient to monsoon shocks, output in large parts is still dependent on rains.

However, he said the encouraging part is the sowing of kharif crops, with the total area sown under kharif crops till October 16 reaching 103.88 million hectares, up from 102.66 million hectares for the same period in 2014.

Rice has been sown in 37.82 million hectares (down 0.4 percent y-o-y), pulses in 11.56 million hectares (up 12.5 percent), coarse cereals in 18.61 million hectares (up 2.3 percent), oilseeds in 18.52 million hectares (up 4 percent) and sugarcane in 4.88 million hectares (up 0.2 percent).

Pant said despite unforeseen supply-side shocks to select agricultural commodities, overall inflation will remain benign in this fiscal.

The ratings agency expects the average wholesale and retail inflation to come in at negative 1.5 percent and negative 4.8 percent respectively, in 2015-16 as against 2 percent and 5.9 percent respectively last fiscal.

"Although a second successive year of deficient rains could have an adverse impact agricultural output, the first advance estimates peg foodgrain production to be higher than last year's," Pant said.