“Elbing El Niño, normal monsoon to boost agriculture sector growth to 3.7% in fiscal 2025”

New Delhi: The El Niño phenomenon and the expected normal monsoon are likely to boost the agriculture sector growth to 3.7 per cent in the current fiscal year from a weak 1.4 per cent growth recorded in the previous year, a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) on Thursday said the trend could have a negative impact on the agriculture sector.

As per the latest round of FICCI’s Economic Outlook Survey, India’s gross domestic product (GDP) is likely to register an annual growth of 6.8 per cent in the first half of the current fiscal year. The GDP growth is likely to accelerate to 7.2 per cent in the second half of the fiscal year, taking the average for the full fiscal year 2024-25 to 7 per cent.

The services sector is forecast to grow by 7.4 percent, while the industrial sector is expected to grow by 6.7 percent in the current financial year.

The survey is based on responses from leading economists representing the manufacturing, banking and financial services sectors, according to a statement released by FICCI.

India’s GDP grew by 8.2 percent in the fiscal year ending March 2024, according to the latest government data. Major organizations including the International Monetary Fund (IMF) and the Asian Development Bank (ADB) have estimated India’s growth in the current fiscal year at 7 percent.

As per the FICCI survey, retail inflation based on the Consumer Price Index (CPI) is likely to remain in the range of 4.4 to 5 per cent. The median forecast for CPI-based inflation has been pegged at 4.5 per cent. “While food prices remain firm and inflation in cereals, fruits and milk is rising, survey participants expect prices to ease in the second quarter as kharif production reaches the market,” FICCI said in the survey report.

Economists surveyed expect the Reserve Bank of India (RBI) to cut the repo rate by 50 basis points to 6 per cent by the end of the current financial year. Most economists believe that a cut in the repo rate is only expected in the “second half of the current financial year as the RBI is expected to continue its cautious approach, keeping a close watch on the inflation trajectory”, FICCI said.

In the context of the Union Budget for 2024-2025, participating economists pointed out that the upcoming budget is expected to include comprehensive measures to boost employment and improve workforce capabilities.

The surveyed economists highlighted the following suggestions, among others: announcing a job-linked incentive scheme, introducing an urban equivalent of MGNREGA (Mahatma Gandhi National Rural Employment Guarantee Act), increasing investment in skill-building programmes and social infrastructure, and implementing targeted policies and support schemes to increase women’s participation in the labour market.

Finance Minister Nirmala Sitharaman is scheduled to present the state budget for 2024-25 on July 23.

According to surveyed economists, the agriculture sector is set to receive more attention in the upcoming budget. Economists have suggested creating reform-linked incentives for states to implement agri-reforms and increase productivity; increased support for development of weather-resistant crops and implementation of adaptation measures against climate impacts; measures to improve storage infrastructure; and setting up a price forecasting mechanism for non-MSP crops to strengthen the agri-supply chain.