Crisils estimates are based on expectations of a normal monsoon and sustenance of growth momentum in industry and services. The analysis takes note of the forecast of the Bangalore-based C-MMACS which predicted a normal monsoon during this year.
In its forecast Crisil has projected two scenarios business as usual (BAU) and optimistic. The BAU GDP forecast is 6.7%, while optimistic forecast is 7%.
The growth performance of the ecomony has been encouraging since 2003-04. The 8.5% real GDP growth in 2003-04 was achieved over a low base. But the sustenance of the growth momentum in 2004-05, despite poor monsoons and high crude prices, implies increased resilience of the economy and raised the hopes spurt in growth from 6% to 7% per year, the analysis said.
As far as forecast by other agencies are concerned, the IMF has projected a growth of 6.7%. The ADB expects the economy to grow at 6.9% in the current ficsal. Under the optimistic scenario, Crisil expects agriculture to grow by 3%, industry by 7.1% and services by 8.5%. In the BAU scenario it expects agriculture to grow by 2.5%, industry by 6.7% and services by 8.3%.
The BAU assumes that agriculture in 2005-06 will be at its long-term trend. A marginal growth deceleration in industry is expected due to high oil prices and pressure on interest rates. Growth momentum in services sector is expected to continue in 2005-06, the Crisil analysis said.
The optimistic scenario assumes a higher-than-average growth in agriculture on account of the growth momentum in non-crop agriculture. The assumed 7.1% growth in industry is contingent on pick-up in private investment.