Good monsoon to help agriculture GDP grow by 7-8% in FY17: SBI

Country's agricultural GDP is most likely to witness a robust performance in 2016-17 and may even touch 7-8% if Met's prediction of a good monsoon comes true, says a SBI report.

The India Meteorological Department (IMD) has predicted a "above normal" monsoon for this year, easing fears over farm and economic growth after two consecutive years of drought.

"We believe the agricultural GDP is most likely to witness a robust performance in 2016-17 and may even touch 7-8% mark because of IMD projections amid the government's plan to lift agriculture sector," the SBI research report said.

"This may pull-up baseline GDP by as much as 50 basis points," it added.

Interestingly, the report has also noted that there are instances where agri GDP has in fact expanded in years of deficient rainfall.

"In 2003 and 2010 agri GDP expanded by an average of 8.5% following years of poor rainfall," it said.

On inflation front, the report estimates CPI (consumer price index) inflation trajectory to be "significantly benign in the current fiscal".

"We maintain that over a point of time as pulse prices decelerate, the pace of price increase will come down," it observed.

"This in turn means RBI will have more firepower to cut rates possibly by upto 50 basis points. Also, with central India, the home to pulses, forecast to receive adequate rainfall in FY17, will only strengthen our case," it added.

According to IMD, monsoon will be 106% of the long period average (LPA) and there is 94% probability that monsoon will be normal to excess this year for most parts of the country.

Agriculture, which contributes about 16% to the country's GDP and employs about 60% of the population, is heavily dependent on the monsoon as only 40% of the cultivable area is under irrigation.