The PHD Chamber of Commerce and Industry (PHDCCI), said a review of the current economic situation shows the net outgo in terms of total debt servicing was in the region of Rs 1,75,200 crore.

In the post-sanctions scenario, capital inflows could be restricted, signalling the possibility of drain on the forex reserves, it said, adding widening trade deficit, lower invisibles and sluggish foreign direct investments were some of the areas of concern.

"Slower revenue collection and increased government expenditure in terms of plan allocations may widen the fiscal deficit," the Chamber said.

"The budgeted deficit figure of 5.6 per cent is already on the higher side and the effect of post-budget rollbacks will increase it to 5.83 per cent," the statement said,adding further slippage on revenue collections during the year may increase the fiscal deficit to touch seven per cent.

Commenting on the general economic scenario, the C6amber observed that with continued sluggishness in industrial growth and lack of demand on the domestic and export fronts, the perception of the overseas investor has dampened "in the wake of sanctions imposed by some developed countries and the downgrading of IndiaÕs soverign rating to below investment grade by international credit rating agencies."

Growth in industrial production remained depressed at between four and six per cent in the current fiscal, with companies facing acute demand slump in most manufactured goods, the PHDCCI said.

Some industrial segments such as rubber products, metal products, paper industries showed robust growth in the first eight months of 1998-99, while other sectors like textiles and non-electrical machinery showed negative growth in the same period, it pointed out.

"Whereas corporate profits were lowduring 1997-98, they are expected to be further compressed during the current fiscal," the Chamber statement noted.The sectors lagging behind were relevant when one considered the cumulative 18 per cent weightage given to these industries in the Index of Industrial Production (IIP).

At the aggregate level, the release said, the overall industrial production grew by only 3.5 per cent compared to 6.6 per cent in the previous year.The Chamber noted that despite some recovery in recent months, infrastructure sectors have not yet exhibited a turnaround in growth."With the promise of increased public spending, some favourable effect is expected on infrastructure facilities," it said, adding at the same time, such expenditure would positively impact demand.

Some recovery in imports could marginally revive industrial production in the coming months, but it might not be enough to bring the economy back to the seven per cent-plus growth rate this year, it said.