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Political uncertainty has hampered economic recovery, says I-Sec study

Political uncertainty at the Centre has dealt a blow to immediate economic recovery, according to a quarterly micro-economic analysis (January-March) by the ICICI Securities and Finance Company Limited.

Important bills on patents, insurance and urban land are awaiting parliamentary approval. Their passage now could be delayed. The flow of foreign investment is also likely to be affected till a stable government emerges, the report said.

The report further states that the long-awaited economic recovery continues to be elusive. The Index of Industrial Production grew just 3.9 per cent in the first eleven months of the year (compared to 6.9 per cent last year).

Exports declined two per cent while import growth of five per cent was largely on the back of non-productive imports of gold and silver and food articles, the repord pointed out.

According to the analysis, India's GDP growth will be at 4.5 per cent to 5.00 per cent this year. The official advance estimate of 5.8 per cent critically hinges on the estimated 5.3 per cent agricultural output. In view of the decline in kharif outout, crop output could be nearer two per cent.

Both the Union Budget and the recently announced Credit Policy have focussed on structural issues, the report states and mentions that the Budget has targeted fiscal deficit at Rs 799.55 billion.

The report notes the swing in the financial markets and states that the Sensex has risen sharply after the Union Budget was tabled. Despite the political uncertainty, equity market rose 15 per cent from the January level.

Asssuming 4 to 5 per cent growth in rabi crop, the analysis estimates the full year growth at 1.5 per cent to 2 per cent. The growth has been mainly on the back of 26 per cent growth in the cotton crop, 13 per cent in pulses, 10 per cent in oilseeds and 5 per cent in the sugarcane crop. The performance in 1999-2000 will again be contingent on the monsoon rains.

UNI

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