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Rain Forecasts Boost Outlook for India's Economy - 2004-07-04

India's meteorological office is forecasting normal monsoon rains for the country this year.

For many in India, monsoon rains that lash much of the country between June and September are just a welcome break from the sweltering heat that envelops the plains during summer.

But the rains are also the lifeline for India's farming sector, which sustains nearly two-thirds of the country's billion-plus population. Farming accounts for one-quarter of gross domestic product.

That is why this year's forecast for normal and evenly spread rainfall could be good news for the Indian economy, helping it stay on the path of high growth. The economy grew by more than eight percent last year, partly due to bountiful showers that gave the farm sector bumper harvests and growth of more than nine percent.

Jayati Ghosh, an economics professor at New Delhi's Jawaharlal Nehru University, says the monsoons are critical for crops because millions of small farmers do not have access to irrigation systems.

"The truth is most of our agriculture remains rain-fed," she said. "We have not spread irrigation adequately, and more than that we have not built up the minor irrigation works, which are the ones which really protect farmers."

Huge water reservoirs for irrigation have been built in recent decades, but these often dry up if the monsoon rains are deficient.

The rains also are crucial to industry. Rural India buys nearly 40 percent of the consumer goods manufactured in the country, from soaps to motorcycles. Slow economic growth from 1999 to 2002 was partly blamed on poor monsoon rains, and some industries slumped because of a lack of demand from rural areas.

Professor Ghosh says a good crop means more money in the hands of rural residents.

"The idea that industry can continue to survive while agriculture lags behind is crazy because purchasing power of two-thirds of your population is being cut, and a whole range of inputs provided by agriculture are under threat," she said.

That is why monsoon forecasts are carefully watched not only by farmers, but also by factory owners, investors, and the government.

But the overall economy has become less vulnerable to the monsoons during the past few years, because agriculture's share of gross domestic product has shrunk. New industries such as information technology are powering the country's growth, and services and manufacturing now account for a bigger share of India's income.