"Our key user industries like the transport and electrical sectors are cutting down production," Hindalco Industries president AK Agarwala, said on Thursday.

"The fact remains that our economy is not picking up due to lack of government spending," Agarwala said.

A 30-month-old economic slowdown has battered India's manufacturing industry, leaving core sectors such as cement and steel straining under excess capacity.

The growth in the country's industrial output dwindled to 3.6 per cent in the first seven months of 1998/99 (April/March) compared with 6.2 per cent in the year-ago period.

Metal traders said there was little hope for an early revival due to the demand slump in key user industries.

"We are still seeing a downturn in the metals industry. Added to this is the fall in LME prices," said Bombay Metal Exchange president SharadParikh.

Car production in the first eight months of fiscal 1998/99 fell two per cent from a year earlier while truck output fell 33 per cent, the Association of Indian Automobile Manufacturers has said.

In the aluminium sector, big producers recently reduced prices and some were offering discounts to get rid of rising inventories, traders said.

"Our inventory levels which are normally for 4-5 days have now increased to about 20 days," Agarwala said, adding that this was widespread across the industry.

In the copper industry, major producers had cut selling prices for January to stoke sluggish demand, traders said.

The power, transformer and electrical equipment industries had all been hit by a slump in demand which had in turn forced manufacturers to cut production, industry players said.

"Due to the bearish trend in prices, our top consumers are buying only what they require for the short-term," said an official at a major copper producer.

However, a near uniformity in the pricing structure ofmajor copper manufacturers has sharply curtailed imports in recent months, industry officials said.

"The price levels are slightly lower than the import cost. So there is not much sense for people to import," said the company official, who did not wish to be identified.

Traders discounted statements by government officials that a revival had begun in some core industries but said speeding up infrastructure projects could help improve demand.

"Major projects have to kick off to start a chain reaction through which industries get fresh orders," said a metal industry official. "This is the time when the government needs to act."

Government officials expect an ambitious highway building project launched earlier in January to assist an industrial recovery.

Work at 20 locations for the 7,000 km road network, to be built at an estimated cost of Rs 280 billion ($6.6 billion). is expected to start at various locations in the next few weeks.