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Wednesday, 31 July, 2002, 13:00 GMT 14:00 UK
Drought to cut Indian growth
Drought stricken well
India's economy is heavily dependent on agriculture
India's growth is expected to be lower than forecast for the current financial year because of the worst drought in more than a decade.

Investment bank Salomon Smith Barney (SSB) has sharply lowered its economic growth estimate for the financial year to 4.8%, from 5.5% projected earlier.

"Rain has been inadequate, down 24% from normal levels as of 24 July. The water level in reservoirs has fallen considerably and is 52% less than a year ago," the firm said in a research note.

"As we believe this will affect growth, we cut our agriculture estimate from 3% to zero, resulting in lower full year 2003 Gross Domestic Product (GDP) at 4.8%, compared with 5.5%," SSB said.

Agriculture minister Ajit Singh told the BBC's World Business Report that it was the wosrt drought since 1987.

Agriculture dependent

The Indian economy is heavily dependent on agriculture, which contributes about one-quarter of GDP.

About 70% of the workforce works in agricultural related activities and the prosperity of the sector plays a key role in determining consumer demand.

SSB said the drought's impact will also have a knock-on effect on industry and services sectors.

It cut the outlook for growth in those sectors to 5.6% from 6%.

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Ajit Singh, Indian Agriculture Minister
"If it rains in the next few weeks at least the paddy (rice) will be saved."
See also:

26 Jul 02 | South Asia
26 Jul 02 | South Asia
17 Jul 02 | South Asia
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