This is particularly so because much of the increases in public investment will take time to fructify and, therefore, may not be able to stimulate demand during 1998-99, the chamber said in a post-budget economic analysis.

Even tapping the external demand will be difficult. A great concern is the silence of the budget proposals as regards increasing exports. The RBI has subsequently attempted to take measures like lower export credit but judging from the reaction in the stock markets, these may be too little to provide a real stimulus to sagging exports, the PHDCCI analysis pointed out.

On the other hand, imports have begun to pick up which is both good news and bad news. The good news is that it indicates higher industrial activity in months ahead and hopefully a rise in industrial production. However,this also indicates a likely scenario of higher trade deficit, the chamber said.

In case the unofficial trade deficit of 10 billion dollars becomes a reality by the end of the year, it may create pressure on country's forex reserves.

Coupled with economic sanctions and lower envisaged forex inflows by way of aid and loans, the balance of payment situation may worsen to the extent of a BoP crisis similar to the one in 1991, the Chamber's analysis cautioned.

In view of the expected lower inflow of foreign capital as a result of economic sanctions, it is necessary to tide over the shortfall of foreign capital flows and still maintain a high investment rate. However, a contrary view suggests that revival of economic growth in a suppressed demand situation may actually need consumption led strategy in the short run, rather than merely achieving a higher savings rate, the analysis pointed out.

Further, the devaluation of currencies of several countries in the wake of the east Asian crisis has further erodedthe competitiveness of Indian exports. The forex market has reacted accordingly with the rupee depreciation by about 14 per cent from Rs 37.16 to a dollar in 1997-98 to the current Rs 42.25.