The lack of new growth drivers in the industrial sector, weakening consuption demand and sluggish investments would slowdown industrial growth in the country, according to a study by the Associated Chambers of Commerce and Industry Assocham).

It said the industrial growth was expected to dip to 6.5 per cent in 2000-01 from 8.1 per cent last year, inflation rate to rise to six per cent from 3.3 per cent in 1999-2000, exchange rate depreciation to rise to six per cent from 2.8 per cent and interest rate (PLR) at 13.5 per cent in 2000-01 from 12.5 per cent in the last fiscal.

The chamber said the biggest concerns in the short term were substantial slowdown in incremental rural incomes in 1999-2000 (at Rs 25,000 crore as against Rs 80,000 crore in the previous year), the negative wealth effect arising out of the asset deflation in stock markets, absence of investment- led demand push and higher inflation, which would lead to lower expansion of real incomes. In the long term, Assocham said, the overriding concerns sluggish investments in manufacturing projects under implementation which fell to Rs 120,000 in April 2000 from Rs 143,000 in April 1999 and Rs 1,91,000 core in April 1998. Aggravating the vulnerability of the economy was the sharp erosion in the market capitalisation by over 25 per cent from Rs 5924 billion in February 2000 to Rs 4409 billion in August this year, the chamber said.

Concurrently, cost pressures for corporates have mounted due to wage indexation due to higher inflation, high prices of petroleum and limited productivity gains which Assocham said, may lead to slowdown in the corporate performance in the rest of the year as compared to April-June 2000-01.

The study indicated that the manufacturing sector has been buffeted by the absence of recovery in price realisation, the chamber said in a release here. The manufacturing Wholesale Price Index (WPI) as a percentage of overall WPI fell from 96.6 per cent in April 1997 to 93.8 per cent in October 1998 and further to 91 per cent in July 2000. On the external front, Assocham said the outlook for exports for the current fiscal looked promising but the overall balance of payments was a cause for worry due to the intense pressure on the rupee.