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India faces drought but economists upbeat

NEW DELHI, August 16, 2009 (AFP) - 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 figures last week came on top of a slew of other economic indicators suggesting India is starting to rebound from the impact of the worst global downturn since the 1930s.

"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.

Malik

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