GDP forecasts trimmed by major banks for India - misplaced concern?

The CSO realeased the Q1 data for FY2009-10 and the growth rate of GDP at factor cost was estimated to be 6.1% (y/y). A lot of concern regarding growth recovery has set into the markets because of poor monsoon (and not so much on global economic conditions). Claims that Agriculture is less than 1/4th of total GDP is misplaced as a lot of industries are agro-based; domestic demand also depends on agriculture. Inflationary concerns cannot be disregarded as the CPI (Industrial Workers) has already begun to rise. In many ways, fiscal concerns are pinned on agricultural output as well.

Fig 1: GDP measured on right scale

Since there is no seasonally adjusted data available for GDP breakdown on a quarterly basis, a look at the year on year estimates of agriculture growth and GDP growth suggests something unique.A simple perusal of this graph may lead us to understand how much agriculture affects GDP growth. I wouldn't call it misplaced concern despite the cushioning effect of the National Rural Employment Guarantee Programme and other such schemes of the Central Government.

Also, the NIPFP-DEA program has come up with seasonally adjusted quarterly GDP data. I would suggest that quarterly projections use this dataset (which will eventually put up seasonally adjusted sub-components of GDP too). For more information see www.mayin.org/cycle.in