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Last Updated: Tuesday, 3 August, 2004, 11:57 GMT 12:57 UK
Late monsoon may cost India dear
Rain in Bombay
The government hopes the rains are not too late
Crucial rains have at last reached the farms of northwestern India - but the late monsoon will still dent economic prospects, analysts have warned.

The timing of the annual rainy season is vital to India, where agriculture accounts for a quarter of output.

Economists now forecast growth of 5.5-6.5% in the next 12 months, down from their previous 7-8% predictions.

Finance Minister Palaniappan Chidambaram said he was "praying for a good monsoon".

India's new government is pinning its hopes on continued strong growth, since its economic policies were called into question during May's election campaign.

Never mind the weather

Mr Chidambaram said he thought it was not too late to make up for the 20% shortfall in July's rains.

Drought in Chandigarh
Weather makes India's economy alarmingly volatile
In part, this could be achieved by encouraging a further influx of foreign investment into promising non-farm sectors, notably information technology.

The government has pledged to maintain, and even accelerate, its predecessor's privatisation programme - but the promise has been attacked by its predominantly left-wing supporters.

Without a significant shift in non-farm output, India will remain at the mercy of the monsoon.

The metereological effect can be severe: poor rains in 2002 cut growth to 4%, while a much wetter 2003 helped send output growth above 10%.


SEE ALSO:
Wages to surge in India, says IMF
22 Jul 04  |  Business
New budget targets India's poor
08 Jul 04  |  Business
India 'set for 7-8% growth'
07 Jul 04  |  Business
Reforming India's maddening tax system
05 Jul 04  |  South Asia


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