Wednesday September 2, 11:20 AM

Morgan Stanley cuts India 2009/10 growth forecast

MUMBAI (Reuters) - Morgan Stanley said it had cut India's economic growth forecast to 5.8 percent in 2009/10 from its earlier projection of 6.4 percent, in anticipation of a drop in agricultural output.

The figure is lower than a government estimate of 6.3 percent for the current fiscal year that ends in coming March, and a Reserve Bank projection of 6 percent with an upward bias.

The U.S. bank said weak monsoon rains and drought in some parts of the country would likely see farm output falling 3 percent in 2009/10, compared with its earlier expectation for 1.5 percent growth.

However, higher government spending in the hinterlands and a drop in the share of farm produce on rural incomes will offset the impact on industry and services sector growth, analysts Chetan Ahya and Tanvee Gupta said in a note dated Sept. 1.

"We expect non-agriculture GDP growth to be largely unchanged," they wrote.

Data released on Monday showed Asia's third-largest economy expanded by 6.1 percent in April-June, largely along expected lines.

(For more news on Reuters Money click http://in.reuters.com/money)