A below-normal monsoon is likely to drag down the food output with India's agricultural GDP growth likely to slump to 0.8% in the current fiscal, says a report by the Japanese brokerage firm Nomura.
The Indian Meteorological Department has forecast that the country is expected to receive a below-normal monsoon rainfall of 93 per cent this year.
"Based on the current forecast, we expect agricultural GDP growth to slow down to 0.8 per cent year-on-year in FY'15 from 4.7 per cent in FY14," it said.
According to IMD, the north western region is likely to be the worst-hit while the rainfall in the north-eastern region is likely to be close to normal.
"The forecast of a poor rainfall during the month of July is a cause of concern as food production during the summer crop season is most dependent on the July rain," report said.
Sugarcane, oil seeds and coarse cereal production is likely to be affected the most.
Food price inflation should be manageable if the government proactively releases foodgrains to contain cereal price inflation and eases import restrictions to ease inflation in the price of edible oils, pulses and other items, the report said.
However, the report said if monsoon rains are 10-15 per cent below the normal, then agricultural GDP growth could be closer to zero per cent or even negative, and CPI could be higher by as much as 100 basis point relative to its baseline forecast of 8 per cent y-o-y by the first quarter of 2015.