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Drought may hit India economic growth, says J P Morgan

Severe drought conditions in several states could adversely affect India's growth prospects in the current fiscal by depressing demand, a report from J P Morgan Securities India said.

"Worsening of the drought situation in several Indian states will adversely affect consumer demand and take its toll on overall GDP growth as well," the firm said in its latest issue of the 'Indian Markets Outlook and Strategy'.

Union Finance Minister Yashwant Sinha earlier this week said India's economic slowdown last year was largely due to a weakening of demand in rural areas where two-thirds of India's one billion population lives.

Last year, poor rainfall in the western and central parts of the country affected the livelihood of millions of people and killed thousands of cattle.

Policy makers are hoping for a good monsoon to revive demand which they expect will stimulate the slowing economy in 2001-02.

India's GDP growth was estimated to have slowed to 6.0 per cent in 2000-01 after expanding by 6.4 per cent in 1999-00.

Finance Ministry officials are hoping growth will pick up to 6.5 per cent in the current financial year, helped by normal rainfall.

On Thursday, a meteorological department official said that monsoon rains are seen on schedule and expected to hit the southern coast early next month.

Farm sector output grew marginally to 0.9 per cent in the last fiscal year and analysts expect it grow to around three percent this year if the monsoon is normal.

J P Morgan said, apart from the looming drought, cheaper imports and lower exports due to a global slowdown increased the downside risk to their 6 per cent growth forecast.

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