India faces drought but economists upbeat
New Delhi (AFP) Aug 16, 2009 – Crops are shrivelling as India faces the spectre of drought but economists say they are still upbeat about the country’s economic prospects. They are banking that a strong industrial performance will help offset the impact of the worst monsoon in years in Asia’s third largest economy. Analysts have been buoyed by new data showing industrial production jumped by 7.8 percent in June from a year earlier — its quickest pace in 16 months. Output was spurred by record low interest rates and government stimulus that have prompted consumers to buy factory-made products such as cars and refrigerators. … “The domestic economy is slowly but definitely reviving,” said Deepak Lalwani, India director at investment house Astaire & Partners in London. Even with “the rain gods playing hooky,” a robust industry and service sector outlook “should offset the (economic) hit from agriculture,” said Rajeev Malik, economist at Macquarie Securities. … “The upside from industrial activity (is) likely to mitigate the negative impact of poor rains,” Goldman Sachs analysts Tushar Poddar and Pranjul Bhandari wrote in a note to clients. … For India’s 235 million farmers, many of them smallholders eking out a living, a bad monsoon can spell financial disaster, wiping out livelihoods. … The country “has witnessed two monsoon failures this decade,” Astaire’s Lalwani noted. In 2004, the rains were 13 percent below normal and in 2002 they were 19 percent below normal, he said. The 2002 drought reduced growth to 3.8 percent, the lowest in 11 years. Growth then rebounded to 8.5 percent the next year when the monsoon revived. This year’s rain shortage threatens to be far worse. The monsoon has been 29 percent below normal so far. …
