Yet, in spite of ourselves, there appears to be a slight ray of sunshine. Agricultural growth was an impressive 6.8 per cent in 1998-99 as against a 5.4 per cent growth in the previous year. A record-breaking rabi harvest has pushed grain production in 1998-99 to just over the 200-million-tonne figure. Sugarcane production is around 300 million tonnes. The buffer stock in government (Food Corporation of India) warehouses are about 21 million tonnes - five million tonnes more than the buffer required. While this is positive news jubilation may be a little premature. Farm yields are still very low. While China raises 6,000 kg of rice per hectare, in India it is a pathetic 2,500 kg per hectare.

Unfortunately the industrial sector continues tolanguish. Industrial production rose by only 3.9 per cent in 1998-99 whereas in the previous year it was nearly double this at 6.9 per cent. Banks continue to be reluctant to lend and despite a two-percentage point fall in the prime lending rate in 1998-99.

Annual growth in credit off take slowed to 12.9 per cent from 11.4 per cent in 1997-98. Even though the recently announced credit policy cut the cash reserve ratio by half a per cent thereby releasing Rs 3,250 crore, the additional funds are not likely to percolate entirely down to industry in the present scenario. This is because (and quite rightly so) banks do not want to lend to companies where there are strong chances that they will lose the money they have lent. Industry's unhappiness is also based on the fact that it had hoped and banked on cuts in interest rates in the credit policy. In this regard industry has to be realistic and must recognise that while the Reserve Bank of India (RBI) can show the way and hint, it no longer manages monetarypolicy by raising/lowering interest rates. It is not the fall in interest rates that will herald a turnaround but rising demand. However, interest tax charged could have been withdrawn. Though the effect may not have been much it would have been a beginning. Interest rates however will only fall when the high level of governmental borrowing reduces. In the wake of the present political crisis, there has been a further deterioration in fiscal management. In 1998-99, governmental borrowing was a stunning Rs 1,03,737 crore and for 1999-2000, the interest payment alone is expected to be Rs 88,000 crore. This must be managed by the government divesting and privatising industries and not by additional taxation. The manner the budget was passed makes one optimistic. Hopefully in the coming year the pace of disinvestment will improve. It is not solely the fall in interest rates that industry should concern itself with but with a buoyant economy with rising demand for all products. Interest rates will be secondary asprofit margins will cushion and contain these.

Corporate performance in several industries has been encouraging - computer hardware, computer software, drugs and pharmaceuticals, food and beverages and chemicals and plastics. Companies have begun to cut the fat and reduce borrowings. The sectors that prospered last year are likely to continue to be good performers. Some that have been depressed have begun showing optimism. Production in the cement industry has risen by about Rs 15 per 50 kg bag to Rs 160. It is also noted that excess capacities are being absorbed by demand - the main consumers being roadways. In the coming year there are also likely to be mergers and acquisitions as companies merge to cut costs and benefit from economies of scale as they divest non-core divisions. It is probably with this sentiment that the Centre for Monitoring the Indian Economy (CMIE) notes "Fiscal 1998-99 ended on a happier note than anticipated throughout the year and 1999-2000 begins on a note of some optimism".

Therupee has been, despite the political upheavals and ratings, reasonably stable. In fact foreign exchange reserves reached a significant $32.5 billion in April - up by $2 billion in two months. The exchange rate is likely to deteriorate however, in my opinion, in the next few months as exports have not picked up and as there will be an outflow of foreign investment funds (on account of the uncertainties). I would not rule out a depreciation in the rupee of between five per cent to eight per cent in the near term.

If one reviews the country's performance and the recent happenings it is clear that while political stability would have accelerated the country's recovery, India is not dependent on it.

The forthcoming election is being called the `mother' of all elections. The country has now realised that coalitions will not work in this country - personal egos and aspirations will never permit it. One hopes that a single party will win enough seats to form a government. If that does not happen themaneuverings and manipulations of the last three years, the rise and fall of governments will continue as politicians will with single-minded concentration seek to promote themselves.

The markets will therefore be very volatile. Up to the time the elections are held and a new government is formed the markets will fall because of uncertainty. Several high priced shares will fall significantly and it would be a good time to enter the market. The industries that one should look at are clearly information technology (hardware and software), pharmaceuticals and fast moving consumer goods.

It may be a good idea to buy into good cement companies. However, stay away for the time being from financial institutions, automobiles, petroleum products, mining and steel

In my opinion the economic recovery will become a reality only after we have a strong government in place - a government that has a mandate for five years to implement the reforms that are necessary to thrust the economy forward into the newmillennium.