Friday August 14, 2009

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By Sam Devraj  ( Assistant Editor )

Growth prediction: India’s commerce and industry minister Anand Sharma

INDIA’S economy can achieve in the year to March 2010 the same level of growth seen a year earlier despite worsening dry conditions that threaten to dent its nascent recovery, commerce and industry minister Anand Sharma said yesterday.

Speaking to reporters after signing a free trade agreement with the Association of South East Asian Nations, Sharma said serious monsoon rain shortfalls since June had affected farm crops but they would not produce food shortage in the country.

"We grew 6.7 per cent last year and we hope to be able to maintain that despite the difficulties that we face. Our domestic demand and consumption is strong. Fundamentally, our economy is strong," he said in an interview to a small group of reporters.

"India keeps substantial buffer stocks of food grains after our two successive years of buffer crops. We have enough of what we have to sustain availability of food," he said.

"We do not visualise any food scarcity in India at all. That is what I can categorically say."

With time running out on the summer sowing season and increasingly gloomy reports from India's farm regions, economists warn that growth could lose as much as two percentage points in the current fiscal year if rains don't improve soon.

Between the start of the summer monsoon season on June 1 and Wednesday (August 12), rainfall was 29 per cent below normal.

Sharma said drought experienced in various parts of India had affected crops including sugarcane, and the government had reacted to it by allowing duty-free imports of raw sugar and up to one million tonnes of duty-free imports of refined sugar. 

In Uttar Pradesh, which produces more than half of India's sugarcane, two-thirds of the districts were declared drought-hit in late July, with rainfall 40-60 per cent short of average.

"Rain shortfalls are not encouraging at all. It is very hard to predict them for different regions and how each state government would react in coping with the problems," the minister said.

The weather situation was "grim", weather office chief Ajit Tyagi told the ET Now television channel yesterday, threatening crops in the current planting season as well as winter-sown wheat and rapeseed.

With just 40 per cent of its cropland irrigated, seasonal rains are crucial to India's agricultural economy, but more than one-quarter of its districts are threatened by drought.

In a bid to reduce the damage, the government has curbed grain exports, stepped up sugar imports, redirected scarce electricity towards irrigation and cracked down on hoarding, among other measures.

"There is a situation that is causing concern now as we review it. But this is the effect of El Nino that is confirmed of also expanding to other countries," Sharma said.

"We are not overlooking the challenges that we have. At the same time, we are not overwhelmed by them, we hope that this situation will not be there when the next sowing season comes in January," he said.

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