BANGALORE - India Inc Friday hoped the economy would grow close to 6-7 percent this fiscal despite drought in many parts of the country.

“The economic growth may take a marginal hit of 0.5-1 percent due to drought in large parts of central and northern India, which has come after seven years of good rains,” Confederation of Indian Industry (CII) president Venu Srinivasan told reporters here.

Admitting that rural demand would take a hit, he said the economy would, however, continue to grow as most sectors, including manufacturing, would do better.

“We still expect close to 6-7 percent GDP (gross domestic product) growth. If rural growth had sustained us last year, urban growth will come back this year to enable the economy grow,” Srinivasan said on the margins of a CII event.

He further said the industry and the government would have to look after millions of people who would not have drinking water and face crop failure this year.

“I think the first role that both the industry and the government will have to play is to look after the plight of millions of these people,” he said.

Reiterating that India would be the second fastest growing economy this year as well, the confederation head said there was a good momentum in demand picking up, as evident from early or green shoots as of March and April.

The world has reached the bottom of commodity prices in April. There will be some inflationary pressures in the near future and because of the deficient monsoon, India would face some pressure on commodity prices.

“I think the government has been seized of the various issues that they have talked about. I see good progress in next few years in the Indian economy and in taking reforms further,” Srinivasan noted.

With respect to movement of goods and services within the country, Srinivasan lamented that there was no “FTA” (free trade agreement) within India as there were still check posts between states.

“With GST (good and services trade) coming (from April 2010), a major barrier will be lifted on internal trade. I think that is the biggest reform the government is doing.”