Drought has potential to impact Indian economy, growth rate may decline to 6%: Montek Singh Ahluwalia

NEW DELHI: Drought can hamper Indian economy's growth rate as it may fall to 6% as compared to 6.5% witnessed during FY12, said Planning Commission Deputy Chairman Montek Singh Ahluwalia.

It is believed that trouble is looming large on Indian economy as drought has impacted the farm production and fuel inflation.

Ahluwalia said, “If we factor in agriculture growth, which would not be strong. Growth would be closer to six per cent. I don't think we have a sufficiently strong industrial turnaround yet.”

Reports suggest that the acreage under pulses and coarse cereals stands 17% less than previous year since sowing could not occur due to poor rainfall.

The poor agricultural production will raise the food prices and impact the farm incomes, which will lower the demand for consumer goods. Also, the firms producing tractors and farm equipment will also witness fall in sales.

The decline in farm output will increase the import bill since more pulses and edible oils will have to be imported.

The Indian economy grew at 5.3% during March quarter, its slowest in nine years. The headline inflation above 7% prevented RBI from lowering the interest rates at its last two policy reviews.