The forecast industrial growth, though up from last year's dismal low, is 5-6 per cent for 1999-2000. This is far from the 10 per cent-plus growth needed for breaking out of recession. But business is perhaps being overcautious, and understating expectations; or so it would seem from the booming government excise revenues. Last month excise collections amounted to Rs 4,553 crore, up 23 per cent over May 1998; customs collections bounced to Rs 3,954 crore, up 14.8 per cent over May 1998.

Revenue from indirect taxes thus showed a sustained rise for the second successive month this fiscal. Therationalisation of excise duty slabs, cess on diesel, and rise in oil import prices contributed to revenue growth but that is unlikely to be the sole explanation. Revenue secretary Javed Chowdhary may well be right in seeing industrial revival as the key reason for the buoyancy in indirect tax collections.

But why doesn't business share the official's optimism? The industrial recession surfaced in the second half of 1995-96 following massive investment in capacity expansion in the previous two years. But there was no corresponding surge in aggregate demand. For the last three years, however, demand has grown steadily, and if it improves this year (rural demand is slated to gather strength in the wake of good harvests), the consequent fillip to capacity utilisation should signal new investment.

If that happens, the turnaround will begin. Apparently, this scenario does not overly enthuse business. One reason is that prices of manufactures have been rising less than other prices, including input prices.This has resulted in a squeeze on margins, dampening investment initiative. Besides, the financial institutions, faced with high NPAs,have become choosey lenders. Investment demand from domestic players, it seems, is unlikely to see a spurt as the economy nears full capacity utilisation.

A related issue, noted by the Confederation of Indian Industry (CII), is the inadequacy of aggregate demand consequent on the fall in capital spending by the government. CII wants this reversed. It also wants rapid clearance of foreign direct investment (FDI) proposals (in less than ninety days); it wants annual FDI to rise from the current $2 billion to $10 billion next year and to $15 billion thereafter. Domestic private investment-led growth is in for a pause, postponing the recovery.