Industrial growth has significantly slowed down during the current fiscal, with the growth in the first seven months averaging 3.6 per cent compared with 6.2 per cent in the previous year. The lowest growth has been in basic goods (1.5 per cent) and consumer goods (1.7 per cent).

"The slowdown is likely to persist in the remaining part of the year, especially with lower agricultural income," says I-Sec in its report ``Macro Economic Update'' for the third quarter of the year. Overall growth in agricultural output this year is expected to be in the 1.5-2 per cent range with the major contribution coming from cash crops such as cotton, sugarcane and spices.

"Amongfoodgrains, only wheat is expected to register a positive growth and this would be contingent on favourable weather over the next month," says I-Sec.

A number of industries in the industrial sector, especially steel and chemicals face competition from imports and are unlikely to improve significantly in the near future. I-Sec has added that the performance of the services sector, which is largely dependent on overall economic activity, is unlikely to match last year's 8.9 per cent growth. I-Sec expects the services sector growth to be at 6.5-7 per cent during 1998-99.

Sluggish industrial growth coupled with low growth in revenue earning imports has seen indirect taxes well below target. Though corporate tax collections have bucked the trend, growing at 30 per cent in the first eight months, the overall shortfall in tax collections is expected to be about Rs 10,000 crore.

I-Sec has said that the PSU disinvestment target of Rs 5,000 crore is likely to be exceeded. While Rs 225 crore has been raisedthrough the sale of shares in Container Corporation of India (Concor), the government plans to sell part of its equity holding in six PSUs through buyback of equity as well as through cross-holdings.

The crash in global oil prices is expected to wipe out the entire deficit in the oil pool account. The oil pool deficit at the beginning of the year was about Rs 13,000 crore. I-Sec has said that the government may choose to shift part of the surplus from the oil pool account to the fiscal account, rather than redeem the entire bond corpus.

With the market borrowings of the government already having exceeded the budgeted amount by about Rs 10,000 crore, I-Sec expects the fiscal deficit to be in the region of 6.5 per cent of GDP.

"Considering the slower industrial growth and tightness in the money markets, measures to tighten money supply could prove counter-productive. On the contrary, the Reserve Bank of India may find it necessary to reduce CRR in order to provide sufficient availability of credit to thecommercial sector during the last quarter, when credit demand usually picks up," said I-Sec in its report.