"Industrial growth will come down with the current unhealthy investment climate in the economy which will affect the all-important infrastructure sector, particularly power," Madhu Dandavate, former Deputy Chairman of Planning Commission, told The Financial Express.

A major factor that is said to be haunting industrial growth is lack of demand in the economy, industry sources point out. With the 23 per cent increase in the savings rate of the gross domestic product (GDP) in the previous fiscal, the natural fallout has been a related decline in demand in the economy. This downslide is being further complicated with the BJP-led government's preoccupation to bring about better fiscal discipline by attempting to cut down government expenditure."The cut in government spending for the currentfiscal is estimated to be about one per cent of the GDP. Computed in rupee terms this works out to Rs 16,000 crore for the year 1998-99," said noted economist D H Pai Panandikar.

Even as money supply has eased and grown by 17 per cent by May-end, causing mild excess liquidity in the economy, the fact remains that there has been little affect on the level of industrial growth. With this, one of the most important indicators of healthy industrial growth, as represented by increase in both production and sales of commercial vehicles in the automobile sector is missing. "This is indicated by the slow down in the production of heavy vehicles, cars and motorcycles by the end of May," Panandikar added.

At the same time sales in the car segment have dropped by 6.5 per cent in the first quarter of the current fiscal as compared to that of the same period in the previous year. In volume terms, sales at the end of June stood at 12,130 units as compared to that of the same period in the previous year, which was at12,973 units. Sources in the Confederation of Indian Industries (CII) point out: "Even as the money supply position is comfortable yet the fact is that funds are not available to the industry. Complicating the issue has been the slump in capital markets which has dried up the industry's alternative avenues to mobilise funds."

CII also points out that even though the new index for industrial production may show an enhanced performance of a 0.6 per cent growth in the production of capital goods for the latest period, the fact remains that the this growth is an eye-wash, given the fact that there was negative growth in the previous fiscal.

Going by the current trends in money supply, demand and overall investment climate, economists fear that at the most optimistic level industrial production will manage to hover around the five per cent mark by the end of the current fiscal.

"I see industrial growth to be no more than five per cent by the end of the current fiscal and that too is an optimisticestimate," points out Panandikar.

Even as the indices dished out by the government may point to a rosy scenario, the anticipated slow down in demand as well as hardening of interest rates is bound to further aggravate industrial growth - in which case the industrial slump would be entering the third consecutive year for the Indian economy.