A study was conducted to develop a stochastic time series model for prediction of annual rainfall and runoff for Lidder catchment of Lidder river. The study area is one of the macro watershed of Lidder river and has an area of 1,243 km. The developed model is based on 15 years (1993-2007) annuall rainfall and runoff data collected by Indian Metrological Department, Srinagar, and Civil Investigation and Design Division, Anantnag, Jammu & Kashmir.