In its monthly review of the economy, CMIE has stated that the 7 per cent growth in the industrial sector during May, the rise in foreign trade, decline in inflation and buoyancy in the stock markets have contributed to the recovery.

Erratic monsoons, according to CMIE, will not affect the kharif output, which is likely to touch 105 million tonnes during the current year. "Some kharif-sowing regions received no rains during three weeks in succession. This is likely to affect the acreages under bajra and soyabean, but will not affect the overall kharif output," CMIE has said, adding that the total foodgrains during the year is likely to touch 205 million tonnes.

During the first quarter, the manufacturing sector has registered a 4 per cent rise in profits while sales have grown 16 per cent after threeconsecutive years of decline. According to CMIE, the recovery witnessed in key sectors like cement, steel and aluminium is fast expanding to other sectors, while the growth in the automoblie segment has fueled a turnaround in related sectors like tyres and tubes, castings and forgings and auto ancillaries.

"Offtake of energy sources--coal, petroleum and electricity--was robust in the first quarter of the year. Traffic on the railways scaled 8 per cent during the period and ports' traffic increased by ten percent," the report has stated.

Lower foreign direct investment (FDI) flows and foreign aid were more than compensated by the fund flow from foreign institutional investors (FII). While FDI and foreign aid dipped to $450 million during April-May 1999 from $749 million in the same period a year ago, the FII investments increased sharply to $651 million compared with an outflow of $441 million last year, CMIE said.

The growth in credit by scheduled commercial banks has slowed down to 14 per cent by June1999 from 16 per cent growth recorded a year ago, "However, flow of funds to the commercial sector, inclusive of investments in corporate securities, was higher by 17 per cent against a near 14 per cent rise in normal non-food credit," the report adds.