Drought not to impact growth substantially: FM

India’s finance minister Pranab Mukherjee said on Friday that drought was unlikely to impact the growth trajectory of Indian economy in any substantial way. The minister added that with continuous improvement in industrial production numbers he hoped that the country would be able to record good growth over the third and fourth quarter of current fiscal.

He however cautioned that growth would fail to match last year’s performance as the recovery was still nascent and progress would be gradual. He rejected the idea of any new fiscal stimulus measures from the government on account of poor rains. Mukherjee said that while stimulus packages provided to economy in December and January had helped growth, these measures cannot be repeated frequently.

The minister also expressed his concerns over the high fiscal deficit and reiterated that no more tax concessions might be given as government had to bring the deficit level down in coming years. The finance ministry had said in annual budget for current fiscal that deficit would be brought down to 5.5% next fiscal and further to 4% by 2011-12.

Indian economy slowed down to a five year low in the December quarter last year at 5.3%. However, since then growth has improved to 5.8% and 6.1% (seasonally unadjusted figures) in following quarters, primarily on account of recovery in domestic consumption boosted by government’s fiscal stimulus efforts.

However, poor monsoon rains this fiscal have threatened the nascent recovery of Indian economy. India’s southwest monsoon has been nearly 25% below normal which has resulted in crop sowing in the kharif season declining by 20%. According to the Planning Commission, farm output is likely to decline by at least 18 million tonne owing to poor rains, resulting in at least half a percentage cut in GDP growth. However, the industrial output is showing better-than-expected recovery which may help compensate, at least partially, the potential decline in farm output.