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Forecast for Good Monsoon Rains Seen Good for Indian Economy


In India, forecasts for a normal monsoon have raised hopes that the economy will continue to stay on a high growth path for the third straight year. An economy growing famous for its high-tech and outsourcing sectors still depends to a large extent on agriculture and the whims of Mother Nature.

The Indian weather office says annual monsoon rains from June to September will be normal this year.

That is good news not only for millions of farmers in the country - but also for industry, government planners and stock markets.

A poor monsoon last year pulled down agricultural growth significantly. Economists say this was one of the factors lowering economic growth to seven percent during the 2004-2005 fiscal year, compared to more than eight percent the previous year.

The Confederation of Indian Industry's South Asia analyst, T.K. Bhaumik, says the monsoon plays a key role in the Indian economy, because for all the publicity given to the country's high-tech industries, farming contributes one-fifth of the gross domestic product - and many farmers in the country do not have access to modern irrigation systems. "Just about 40 per cent of the cultivated land is under irrigation, which means there is a vast amount of dry-land farming in this country - so that part depends entirely on monsoon," he says.

Good rains ensure higher incomes, fueling demand for domestic products ranging from soap to television sets to tractors.

Mr. Bhaumik says that market can be massive in a country where two-thirds of the population, or 600-million people, still depend on the farm sector. "We are increasingly realizing the importance of the rural market. In fact today in many segments of Indian industry, consumer durables and consumer non-durables also, you see that there is high growth in the rural market," he says.

Many economists are cautious about talk of an ample monsoon after last year's rains turned out to be erratic despite favorable forecasts.

But they say if the rains are plentiful, India's economy will grow at more than seven percent. Stock traders have welcomed the news - it was one of the factors that triggered a nearly three percent rise in the markets in recent days.

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