If India’s overall rainfall deficiency falls to 20%-25%, India’s GDP growth could fall to sub-5% this fiscal year, says Mridul Saggar, chief economist at Kotak Securities. India government forecasts FY economic growth of between 6.25% and 7.75%. Meteorological Department forecasts rainfall
in June-September wet season at 93% of long-term average, which not an
unusually large deviation, but distribution so far has been extremely uneven,
with some areas flooded while others parched. After driest June in 83 years, 4 of India’s 28 provinces declared drought. A slump in the agricultural sector
would pressure government to respond with support measures, even as it already struggles with fiscal deficit of 6.8% of GDP. Jahangir Aziz, chief India
economist at JPMorgan, estimates inflation to rise by 2 to 3 percentage points over RBI’s baseline forecast of 4% if monsoon rains don’t pick up.